Bitcoin faces worst month since FTX crash with ETF demand cooling
THE prospect of higher-for-longer interest rates is weighing on crypto, underlined by deepening Bitcoin losses after the token’s worst monthly drop since the collapse of Sam Bankman-Fried’s FTX empire in November 2022.
The largest digital asset slumped almost 16 per cent in April as a mania for US spot-Bitcoin exchange-traded funds (ETFs) flatlined after earlier lifting the token to a record high of almost US$74,000 in March.
Tuesday’s (Apr 30) debut of Bitcoin and Ether ETFs in Hong Kong also failed to provide a tailwind. Trading volume for the six vehicles totalled US$12.7 million on the first day, sizeable locally but smaller than the US$4.6 billion achieved by the US products when they went live in January, according to Bloomberg Intelligence.
Delayed cuts
A case is building for the United States Federal Reserve to signal a delay in rate cuts after officials conclude a policy meeting on Wednesday. The latest US data highlighted a climb in labour costs, adding to evidence of inflationary pressures. Real yields – seen as the true cost of money for borrowers – are jumping, a tough backdrop for speculative assets such as digital tokens.
The recent moves higher in Treasury yields and real rates have been “toxic for gold, Bitcoin and US equity”, wrote Chris Weston, head of research at Pepperstone Group, in a note.
Bitcoin shed 3 per cent as at 8.25 am on Wednesday in London to trade at about US$58,000, a two-month low. Smaller tokens such as Ether and the meme-crowd favourite Dogecoin also nursed losses.
ETF outflows
A net US$182 million was pulled from the group of almost a dozen US spot-Bitcoin ETFs last month to Apr 29, according to data compiled by Bloomberg. The funds saw US$4.6 billion in net inflow in March.
“ETFs created a new avenue for engagement that has been wildly popular, much more popular than anyone’s expectations,” said Seth Ginns, Coinfund’s managing partner and head of liquid investments, during a Bloomberg Television interview on Tuesday. That “led to Bitcoin moving up very quickly, much further than what has been anticipated”.
The Bitcoin network underwent a so-called halving last month, a four-yearly event that reduces new supply of the token and which some analysts view as a bullish precursor. So far, the supply curbs have failed to provide much of a discernible prop for prices.
“The recent downtrend can be attributed to increased profit-taking by investors who entered the market during the downturns of 2022 and 2023, as well as ETF investors who witnessed significant price appreciation on their shares after entering the market in the early weeks of 2024,” wrote Matteo Greco, research analyst at Fineqia International, in a note.
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