Bitcoin
Bitcoin’s (BTC) Recent Weakness Was Not Isolated to Crypto Markets, Says Coinbase (COIN)
Bitcoins (BTC) The recent weakness has not been isolated to crypto markets and is therefore not indicative of sector-specific capitulation, Coinbase (COIN) said in a research report on Friday.
Coinbase notes that both stocks and gold have been trading lower since hitting highs in mid-April amid a strengthening dollar. The world’s largest cryptocurrency fell 16% in April, the biggest monthly drop since June 2022.
“What makes us optimistic about this pullback is that BTC’s maximum drawdown from the peak is at 23%, below its historical range,” wrote analysts David Han and David Duong.
“We believe this trend of a general reduction in withdrawals will persist, in part due to the legitimization of BTC as a macro-asset,” the authors wrote. This has been reinforced 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 flows may not be as large as those seen in the US, “we think they represent an important signal for regulatory engagement with the asset class globally,” the report states.
Blackrock’s iShares Bitcoin Trust (IBIT), the largest bitcoin spot ETF, ended its 70-day inflow streak on Wednesday and saw its first exit, the report noted. “While this indicates a slowdown in capital flows into the asset class via the ETF product, we believe ETF flows only drive a portion of BTC price discovery given the global and deeply liquid markets in 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 over the same period,” said 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 US ETF flows as a proxy for global price discovery is most obvious in the case of gold, Coinbase said. The largest US gold ETF, SPDR Gold Shares, had a net outflow of $3 billion in 2024, despite the precious metal rising 12% year-to-date.