Blockchain
Bitcoin (BTC)’s Recent Weakness Wasn’t Isolated Just to Crypto Markets, Says Coinbase (COIN)
That of Bitcoin (BTC) The recent weakness has not been limited to cryptocurrency markets and is therefore not indicative of a specific sector capitulation, Coinbase (COIN) said in a research report on Friday.
Coinbase notes that both stocks and gold are trading lower after hitting highs in mid-April, against the backdrop of a strengthening dollar. The world’s largest cryptocurrency fell 16% in April, marking its biggest monthly decline since June 2022.
“What leaves us optimistic about this pullback is that BTC’s maximum decline from the peak is at 23%, below its historical range,” wrote analysts David Han and David Duong.
“We believe this trend of overall withdrawal reduction will persist, in part due to the legitimization of BTC as a macroasset,” the authors wrote. This has been strengthened by spot exchange-traded funds (ETFs) in the US, Canada and Europe and also by recently launched ETFs in Hong Kong and new applications in Australia.
While foreign ETF inflows may not be as large as those seen in the U.S., “we think they represent an important signal for regulatory engagement with this asset class globally,” the report said.
Blackrock’s iShares Bitcoin Trust (IBIT), the largest spot bitcoin ETF, ended its 70-day streak of inflows on Wednesday and saw its first outflow ever, the report notes. “While this indicates a slowdown in capital inflows to the asset class via the ETF product, we believe ETF flows are only driving a portion of BTC price discovery given the global and deeply liquid markets on centralized exchanges (CEX).”
“Average weekday spot volume on CEXs during 1Q24 was $18.8 billion, more than eight times the $2.3 billion daily volume of U.S. spot ETFs during the same period,” si reads in the note. “This discrepancy in activity leads us to believe that bitcoin price discovery still remains rooted in global demand trends.”
The problem with considering U.S. ETF inflows as a proxy for global price discovery is most apparent with gold, Coinbase said. The largest gold ETF in the U.S., SPDR Gold Shares, has had a net outflow of $3 billion in 2024, even as the precious metal is up 12% year to date.