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Evaporating US Bitcoin ETF demand sends token to a two-week low

Bloomberg
Bloomberg • 2 min read
Evaporating US Bitcoin ETF demand sends token to a two-week low
The slide comes amid uncertainty over whether above-target inflation will lead Federal Reserve policymakers to trim rate-cut projections at their meeting on Wednesday, portending a less favourable backdrop for speculative investments. Photo: Bloomberg
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Bitcoin sank to a two-week low as demand for dedicated US exchange-traded funds dries up and investors question the Federal Reserve’s scope to lower interest rates quickly.

The digital asset has declined almost every day since hitting a record high just shy of US$73,798 on March 14, stoking questions about whether the cryptocurrency has peaked for the time being. Bitcoin shed about 4.5% to change hands at US$60,900 as of 1.26 p.m. on Wednesday in Singapore.

Demand has cooled for US spot-Bitcoin ETFs that launched with much fanfare on Jan. 11. The products have garnered a net inflow of US$11.7 billion so far but the group as a whole suffered its biggest outflow on Tuesday. 

Exits from the Grayscale Bitcoin Trust drove the US$326 million efflux, while subscriptions shriveled for rival offerings from the likes of Fidelity Investments and BlackRock Inc., according to data compiled by Bloomberg.

Bitcoin’s slide comes amid uncertainty over whether above-target inflation will lead Fed policymakers to trim rate-cut projections at their meeting on Wednesday, portending a less favorable backdrop for speculators.

While Bitcoin’s recent struggles are partly to do with the Fed outlook, “the commitment of some of the latecomers that bought in above US$60,000 — expecting a never-ending stream of inflows into the new Bitcoin ETFs — is now being tested,” said Tony Sycamore, a market analyst at IG Australia Pty.

See also: Online casino guide platform finds Singapore ninth-most 'crypto-friendly' country globally

The wider crypto market has lost roughly US$460 billion since reaching US$2.9 trillion last week, based on data from CoinGecko. Tokens like Ether and BNB, as well as meme-crowd favorite Dogecoin, are all sitting on losses for the period.

A washout in bullish bets using derivatives may have further to run, pointing to a potential impediment for any quick recovery in the digital-asset market, according to K33 Research.

“Risks are thus still considerable for continued amplified downside volatility stemming from long liquidations,” K33 Research’s Anders Helseth and Vetle Lunde wrote in a note.

See also: More than 90% of stablecoin transactions aren’t from real users, study finds

Coinglass data show about US$511 million worth of bullish crypto wagers were liquidated in the past 24 hours — one of the heaviest such drops in the past two weeks.

Digital-asset optimists continue to anticipate a fillip for Bitcoin from an upcoming reduction in the token’s supply growth. But a downbeat mood is prevalent currently, underlined by slumps this week in crypto-linked stocks such as US exchange operator Coinbase Global Inc., Bitcoin holder MicroStrategy Inc. and Japanese financial services company Monex Group.

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