Bitcoin, Crisis Signals from Risk Index...Institutional ETF Demand Evaporates

▲ Bitcoin (BTC)

The Bitcoin (BTC) market has entered a severe downside risk zone, driven by sustained institutional selling and large-scale outflows from US spot Bitcoin exchange-traded funds (ETFs).

According to crypto media outlet Cointelegraph on May 26 (local time), crypto analytics platform Swissblock reported on Tuesday that the Bitcoin risk index recorded a high-risk score of 33 out of 100 points. Swissblock explained, "Whenever the risk index signals that selling pressure is structurally overwhelming the market, institutional distribution is behind it."

The platform's proprietary risk index measures the relative balance between buying and selling pressure to gauge the overall market risk level and assess how risky it is to buy or hold coins currently. Swissblock added that after strong accumulation in March and April, May has seen a return to distribution, and as Bitcoin spot ETF fund flows worsen, the risk index is moving into a high-risk area. It further warned that demand for Bitcoin spot ETFs can no longer effectively absorb selling pressure, and without strong demand support, the risk index could continue to accelerate its upward trend.

On-chain analytics provider Glassnode reported on Monday that US spot Bitcoin ETFs have recorded net outflows on almost every trading day since May 7, showing a continuous signal of institutional selling for over two weeks. Glassnode analyzed, "This outflow trend continues to weigh on the supply side without a clear offsetting demand." CoinEx Senior Analyst Jeff Ko diagnosed on Tuesday that the broader cryptocurrency market remains in a wait-and-see mode. Ko assessed, "Over $2 billion has flowed out of Bitcoin spot ETFs in the past two weeks, suggesting a slowdown in institutional risk appetite."

Investor sentiment further deteriorated on Tuesday morning with multiple reports that the US launched new airstrikes against Iran despite recent progress in peace agreements. The US Central Command announced that these airstrikes, targeting Iranian missile bases and vessels attempting to lay mines, were in self-defense and aimed at protecting US forces from Iranian military threats.

According to TradingView data, Bitcoin's price on Coinbase fell from over $77,000 to below $76,500, a 1% drop, but has remained within a limited range for nearly four months. Ko predicted that despite the US government's defensive operations, investors appear to be focusing on the possibility of a peace agreement between the US and Iran beyond geopolitical noise, suggesting that short-term market reactions could still lean towards risk appetite.

*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.*