Despite a brief uptick in U.S. retail investor interest, Bitcoin (BTC) has continued its downward trend, falling below $59,000 with a weekly loss of over 3.5%. This decline is largely attributed to reduced demand and net outflows from major exchange-traded funds (ETFs), such as BlackRock’s IBIT.
Reduced Demand and Net Outflows from Major ETFs
The data suggests that the demand for Bitcoin has been waning in recent weeks, with some of the largest ETFs recording significant net outflows. This is a concerning sign for the market, as it indicates that professional investors are losing confidence in the cryptocurrency.
- On Thursday, U.S.-listed BTC ETFs recorded $71 million in net outflows, marking the third consecutive day of redemptions.
- The biggest losers on Thursday were Fidelity’s FBTC and Grayscale’s GBTC, with outflows totaling $31 million and $22 million, respectively.
- BlackRock’s IBIT, the world’s largest bitcoin fund by assets under management, recorded its second-ever net outflow of $13 million.
U.S. Retail Investor Interest Remains Strong
Despite the decline in demand from professional investors, data suggests that U.S. retail investor interest in Bitcoin remains strong. The bitcoin price premium on Coinbase has increased to its highest level since July, indicating a surge in demand for the cryptocurrency among individual investors.
- According to CryptoQuant’s Thursday report, the bitcoin price premium on Coinbase is now at 3.5%, up from just 1% last week.
- Additionally, exchange data shows that bitcoin is flowing again from exchanges outside the U.S. to Coinbase, a signal of higher demand from U.S. investors and a condition historically correlated with higher prices.
Market Volatility Expected to Pick Up in Coming Weeks
Traders anticipate increased volatility in the coming weeks, driven by upcoming economic reports and political developments.
- Augustine Fan, head of insights at SOFA, noted that market action is expected to pick up after US Labour Day and into next week’s NFP.
- QCP Capital traders also expect price action to remain choppy even as market volatility may continue.
- The risk reversals until Oct are still skewed towards puts in both BTC and ETH, indicating that the market remains cautious about the downside.
Federal Reserve’s Rate Cut Signals Buoying Bullish Sentiment
The Federal Reserve’s confirmation of a pivot to lower borrowing costs next month has historically buoyed bullish sentiment among traders. With cheap access to money spurring growth in riskier sectors, it is expected that prices will continue chopping within the range as we move into September.
Conclusion
Bitcoin’s decline is largely attributed to reduced demand and net outflows from major ETFs. However, U.S. retail investor interest remains strong, with a surge in demand for the cryptocurrency among individual investors. Market volatility is expected to pick up in coming weeks driven by upcoming economic reports and political developments. The Federal Reserve’s rate cut signals are also buoying bullish sentiment among traders.
Recommendations
Based on the analysis, here are some recommendations:
- Professional investors should be cautious about investing in Bitcoin given the reduced demand and net outflows from major ETFs.
- Individual investors should continue to monitor market developments and adjust their portfolios accordingly.
- Traders should be prepared for increased volatility in coming weeks.
Key Takeaways
- Reduced demand and net outflows from major ETFs are contributing to Bitcoin’s decline.
- U.S. retail investor interest remains strong, with a surge in demand for the cryptocurrency among individual investors.
- Market volatility is expected to pick up in coming weeks driven by upcoming economic reports and political developments.
- The Federal Reserve’s rate cut signals are buoying bullish sentiment among traders.
Sources
- 1 CoinGecko data shows that BTC lost just over 1% in the past 24 hours, bringing weekly losses to over 3.5%.
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