Summary
- In June, U.S. spot Bitcoin ETFs have experienced outflows totaling $2.1 billion, closely following May's $2.4 billion withdrawals.
- Over the past month, net assets have decreased by $33 billion, dropping from $109 billion to $77 billion, correlating with Bitcoin's 27% decline.
- Analysts suggest that the current rate of ETF outflows is "exhausting rather than building," though opinions vary on what could reverse this trend.
The outlook for the cryptocurrency market remains pessimistic as spot Bitcoin ETFs continue to lose value against a backdrop of challenging macroeconomic and geopolitical conditions.
According to data from SoSoValue, Bitcoin ETFs have lost $2.1 billion in June so far, mirroring May's outflows of $2.4 billion. A recent outflow of $214 million on Wednesday indicates that this trend persists, even following a brief inflow on June 4 that interrupted a 13-day streak of losses, which saw about $4.4 billion withdrawn from these funds.
Since May 10, total net assets have fallen approximately $33 billion, from $109 billion to $77 billion, aligning with Bitcoin's 27% drop from its peak of $81,443 to a low of $59,353.
Despite the ongoing negative trend, Adam Haeems, head of asset management at Tesseract Group, noted to Decrypt that the rate of ETF outflows has "materially moderated." He added, "The pressure has not cleanly stabilized yet, but it is exhausting rather than building."
Understanding ETF Dynamics
Haeems identified three primary factors contributing to the outflows: leveraged funds redeeming shares following arbitrage between spot ETFs and futures, a significant outflow from the highest-fee U.S. spot fund, which has seen nearly $27 billion exit since its inception, and a shift of capital toward AI stocks and forthcoming tech IPOs.
He explained, "The first two factors are mechanical and self-limiting. The third is what we monitor closely, as it relates to risk appetite rather than market structure. Some funds recorded net inflows on Monday, despite the overall negative trend, indicating that the selling is concentrated rather than widespread."
The primary driver of these outflows appears to be uncertainty linked to the ongoing conflict between the U.S. and Iran, now in its 103rd day. This situation has led to spikes in oil prices, creating significant volatility that has affected energy costs and U.S. inflation statistics.
The annual inflation rate increased from 3.8% to 4.2% in May, complicating matters for the Federal Reserve, which has maintained interest rates in the 3.50% to 3.75% range for the past six months.
Robin Singh, CEO of Koinly, remarked to Decrypt that while the unexpected rise in the CPI is unfavorable for risk assets like Bitcoin, he does not think it significantly alters the market outlook. He stated, "For ETF outflows to cease, we need to see a rise in spot demand and Bitcoin needs to reclaim prices well into the $70,000s range." He believes that once Bitcoin demonstrates sustained strength, ETF flows are likely to improve.
Conversely, Haeems posited that a rate signal, rather than a price surge, would be necessary to halt the outflows. He explained that "the carry trade needs the basis to pay again, and allocators need the market's hike pricing to diminish."
Not all inflation indicators are trending upwards; the month-over-month core CPI fell to 0.2%, which Haeems described as "a mild relief" for the rates market.
Bitcoin's Quarter-End Perspective
Bitcoin has gained 1.5% in the last 24 hours and is currently valued at around $62,560, according to CoinGecko data.
Data on derivatives indicates that total open interest has continued to rise following the weekend selloff, aiding Bitcoin's recovery to $63,000. The Coinbase Premium index remains below zero but has significantly improved from early June levels, as per Velo data.
Experts have differing opinions regarding Bitcoin's outlook as the quarter ends.
While Singh maintains a bearish stance and does not dismiss the possibility of Bitcoin dropping into the $50,000 range, Haeems takes a more cautious view, predicting that flows will stabilize before any price recovery occurs.
He commented, "The market has spent a week defending the 200-week moving average, and we find it more probable that a fragile base around that level will hold rather than a swift recovery. Significant technical reclaim levels are well above the current spot price, and the upcoming Fed meeting is a clear catalyst for movement in either direction."
Haeems also pointed out the asymmetry in the current market environment, stating, "A decisive drop below $60,000 would expose the market to considerably more downside risk than the potential upside available from a relief rally. If the June inflation data shows energy costs impacting core inflation, tighter rate expectations may persist, extending the current consolidation. If core inflation remains stable, the second half of the year could present a better outlook than the latter half of June."
On Myriad, a prediction market owned by Decrypt’s parent company Dastan, users lean toward a bearish perspective, assigning a 71% probability to Bitcoin's next movement leading it to $55,000 instead of $84,000.