Spot Fund Outflows of $490 Million… Is Bitcoin's Rally Momentum Over?

▲ Bitcoin (BTC)/AI generated image ©

Large-scale outflows from US-listed spot exchange-traded funds (ETFs) for three consecutive days are raising market tension. However, a contrarian view suggests that surging inflation could actually stimulate demand for alternative assets, potentially sparking a new bull market.

According to investment media FXStreet on May 1 (local time), a net outflow of $490 million occurred from Bitcoin (BTC) spot ETFs from Monday to Wednesday. This reverses the trend of the past two weeks and indicates a decrease in institutional demand. However, from a long-term perspective, a robust net inflow of $3.3 billion has been maintained since March.

Investor anxiety also stems from the fact that while the S&P 500 index has hit an all-time high, Bitcoin's price has fallen by 14% this year. However, the mood shifted as the tech sector, which failed to satisfy investors with its earnings announcements, underwent an adjustment. Meta adjusted by 9%, and Microsoft's stock price fell by 4%. Furthermore, risk aversion was triggered as Brent crude oil surged to $126 after the outbreak of the Iran war in late February, and the US 5-year Treasury yield sharply rose from 3.51% two months ago to 4.02%. This is a result of investors demanding higher yields on government-guaranteed bonds amid rising inflationary pressures.

Bitcoin's loss of upward momentum around $78,000 is also intertwined with deteriorating macroeconomic conditions. According to the US Department of Commerce, first-quarter gross domestic product (GDP) growth was an annualized 2.0%, falling short of economists' expectations of 2.3%. Meanwhile, Strategy, led by Michael Saylor, announced that it acquired 56,235 Bitcoins at an average price of $75,537 during the first four weeks of April. The market is concerned that if Strategy's large-scale accumulation pace slows, even temporarily, it could significantly impact the price.

The virtual asset market activities of the family of US President Donald Trump also acted as a factor undermining overall industry confidence. Three US senators have called for an official investigation into the profits earned by the Trump family through virtual asset ventures. While the short-term double whammy of high inflation and low economic growth is unlikely to be resolved, experts draw a line, stating there is no need to be overly fearful of just three days of Bitcoin fund net outflows.

Consequently, as the real returns of fixed-income assets decrease when reflecting price increases, long-term demand for scarce alternative assets is likely to inevitably increase. Despite the waves of macroeconomic uncertainty and fund outflows, Bitcoin's fundamental bullish trajectory towards $80,000 remains robust.

*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.*