Bitcoin falls out of favor after losing grip at $22,000, fund flow report shows
After dominating crypto inflows for most of the year so far, Bitcoin fell out of favor in the eyes of investors last week. That’s according to the latest weekly Digital Asset Fund Flows report produced by crypto analytics firm CoinShares, which tracks investment flows into and out of digital asset investment products. Bitcoin fell back below $22,000 last week for the first time since mid-January last Thursday, finally falling 5.0% last week.
According to CoinShares, Bitcoin investment products had a net outflow of $10.9 million last week, while altcoin investment products had a net inflow of $3.9 million. It’s worth noting that short-Bitcoin products had an outflow of $3.5 million, with some investors apparently taking advantage of the recent pullback to take profits or cut losses on short positions in the wake of 2023’s rally.
Ethereum finally started to see some love. The world’s second-largest cryptocurrency by market capitalization and dominant provider of decentralized finance/application blockchain infrastructure saw inflows of $5.1 million, bringing it to $15 million so far this year. It still lags behind Bitcoin, which has seen related investment products receive inflows of $183 million.
Net Crypto Outflows Triggered by Fed Tightening Fears
CoinShares put net outflows of $7 million in digital asset investment products down to investors who were “frightened by the prospect of further rate hikes from the US Federal Reserve” in the wake of “a week of macro data that significantly beat expectations to the upside”. The week before last, US PMI survey data for January both surprised massively to the upside, signaling that the US economy is still quite warm and boosting confidence in the Fed that it can continue with rate hikes without triggering a recession.
Investors face another testing week of macro risks
This week could easily follow in the footsteps of last time, with further outflows from digital asset investment products highly likely if macro headwinds persist. Crypto traders will be nervously monitoring Tuesday’s US Consumer Price Index (CPI) report. Worryingly for the crypto bulls, economists are predicting a rise in MoM inflationary pressures which, if confirmed, could worry Fed policymakers and increase their resolve to take and hold interest rates above 5.0% for some time.
This could reinforce the recent rally seen in the US dollar against most of its major G10 peers and in US bond yields, which could weigh heavily on crypto. A rise in US inflation could push Bitcoin down towards the $20,500 support area (the 18th January low and 50DMA). A break below here would open the door to a test of the 200DMA and realized price in the upper $19,000s.
Crypto traders will also monitor US retail sales data on Thursday, which will inform expectations about how likely the US is to fall into a recession later this year. Market participants will also keep an eye on comments from a smattering of Fed policymakers who will speak throughout the week.
