Spot Bitcoin ETFs have come under intense pressure as the mood in the crypto market continued cooling. Data shows that most of these ETFs recorded outflows for the first time since their approvals in January.
Bitcoin ETF outflows
According to Bloomberg, these funds lost almost $200 million in April after adding $1.4 billion in the previous month. the Grayscale Bitcoin Trust (GBTC) has $19 billion in assets, down from the year-to-date high of over $28 billion.
The iShares Bitcoin Trust (IBIT) has about $18 billion in assets, meaning that it could soon overtake GBTC if the trends continue. Fidelity’s FBTC ETF has $10 billion while Cathie Wood’s Ark 21Shares Bitcoin ETF (ARKB) has about $2.7 billion in funds.
Not all Bitcoin ETFs have lost assets in the past few weeks. However, what is clear is that inflows to most of these funds will continue seeing soft inflows in the coming months.
There are three main reasons for this. First, as I wrote earlier, the price of Bitcoin has formed a bearish engulfing pattern on the monthly chart. In most cases, this is one of the most bearish chart patterns in the market. I believe that Bitcoin will drop to about $50,000 in May even though I have a bullish view of the coin in the long term.
Hawkish Federal Reserve
Second, there is a likelihood that the Federal Reserve will maintain a hawkish tone when it completes its meeting on Wednesday. Besides, recent data shows that the US inflation was still strong.
A report released on Friday showed that the Personal Consumption Expenditure (PCE) inflation rose to 2.5% in March. The core PCE figure rose to 2.8%, which is higher than the Fed’s target of 2.0%. A separate report revealed that the Consumer Price Index (CPI) rose to 3.5% in March.
Therefore, the Fed has room to maintain a hawkish tone when it completes its meeting on Wednesday. In most cases, a hawkish tone tends to have an impact on financial assets like Bitcoin and technology stocks.
Third, these ETFs will likely see weak inflows because of the continued selling among traders. In most cases, Bitcoin price tends to drop sharply after losing its bullish momentum as people start dumping their assets. We have already seen this trend intensify in the meme coin industry.
To be clear: in the long term, these ETFs will do well because of its key fundamentals. Bitcoin supply in exchanges has dropped while there is an increased demand for alternative assets. Also, Bitcoin supply is falling because of the recent halving event.
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