Spot Funds See $490 Million Outflow… Is Bitcoin's Rally Momentum Over?

▲ Bitcoin (BTC)/AI generated image ©

While large-scale funds have flowed out of US-listed spot Exchange Traded Funds (ETFs) for three consecutive days, heightening market tension, a contrarian view suggests that surging inflation could actually stimulate demand for alternative assets, potentially igniting a new bull market.

According to investment specialized media FXStreet on May 1 (local time), a net outflow of $490 million occurred from Bitcoin (BTC) spot exchange-traded funds from Monday to Wednesday. This reverses the trend of the past two weeks, indicating a decrease in institutional demand. However, from a long-term perspective, a robust net inflow of $3.3 billion has been maintained since March.

Investor anxiety also stems from the fact that while the S&P 500 index hit an all-time high, Bitcoin's price has fallen by 14% this year. However, the mood shifted as the technology sector, which failed to satisfy investors in earnings announcements, underwent adjustments. Meta saw a 9% correction, and Microsoft's stock price dropped by 4%. Furthermore, risk-aversion sentiment was triggered after Brent crude oil surged to $126 following the outbreak of the Iran war at the end of February, and the US 5-year Treasury yield sharply rose from 3.51% two months ago to 4.02%. This is a result of investors demanding higher yields on government-backed bonds amid rising inflationary pressures.

Bitcoin's loss of upward momentum around the $78,000 mark is also intertwined with deteriorating macroeconomic conditions. According to the US Department of Commerce, the first-quarter Gross Domestic Product (GDP) growth rate was 2.0% annually, falling short of economists' expectations of 2.3%. Meanwhile, Strategy, led by Michael Saylor, announced that it accumulated 56,235 Bitcoins at an average price of $75,537 during the first four weeks of April. The market is concerned that a temporary slowdown in Strategy's large-scale accumulation could significantly impact the price.

The cryptocurrency market activities of the family of former US President Donald Trump also contributed to a decline in overall industry confidence. Three US senators have called for an official investigation into the profits earned by the Trump family through cryptocurrency ventures. While the dual challenges of high inflation and low economic growth are unlikely to be resolved in the short term, experts draw the line by stating there's no need for excessive fear over just three days of net outflows from Bitcoin funds.

Consequently, as the real returns on fixed-income assets decrease when reflecting rising prices, long-term demand for scarce alternative assets is highly likely to increase inevitably. Even amidst the waves of macroeconomic instability and fund outflows, Bitcoin's fundamental bullish trajectory towards $80,000 remains robust.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*