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James Carter

February 14, 2023

Bitcoin loses grip on $22K, falls out of favor according to fund flows report

After leading the way in terms of cryptocurrency investments for the better part of the first half of the year, Bitcoin’s popularity among investors began to decline last week. This is what the most recent weekly Digital Asset Fund Flows report indicates, which was prepared by the cryptocurrency analytics business CoinShares. This data follows the investment flows into and out of digital asset investment products. Last week, the price of bitcoin decreased by a total of 5.0 percent, culminating in a decline that occurred on Thursday when it went below $22,000 for the first time since the middle of January.

According to CoinShares, Bitcoin investment goods experienced a net outflow of $10.9 million during the previous week, whilst altcoin investment products experienced a net inflow of $3.9 million during the same time period. It is important to note that short-Bitcoin products experienced a net outflow of $3.5 million. This could be because some investors used the recent drop to lock in profits or cut losses on short positions in response to the rise in 2023.

At long last, Ethereum received some positive attention. The world’s second-largest cryptocurrency measured by market value and the preeminent blockchain infrastructure provider for decentralized finance and applications received inflows of $5.1 million, bringing its total inflow for the year to date to $15 million. Compared to Bitcoin, which has seen comparable investment products get inflows of $183 million, this is still a long way behind the pace set by Bitcoin.

Net Crypto Outflows Triggered By Fear of Fed Tightening

The fear of the Fed tightening caused a net outflow of cryptocurrency.
After “a week of macro data that beat expectations by a large amount on the upside,” CoinShares said that investors were “scared by the prospect of more rate hikes by the U.S. Federal Reserve” and pulled $7 million out of digital asset investment products. This is what CoinShares said because “a week of macro data that was much better than expected on the upside.” Both the jobs market and the ISM services PMI survey data for January in the United States surprised significantly to the upside the week before last. This indicates that the economy in the United States is still doing fairly well and boosts the Fed’s confidence that it can continue to raise interest rates without causing a recession.

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Investors Face Another Testing Week of Macro Risks

Another challenging week of macroeconomic risks awaits investors.
If macroeconomic headwinds continue in their current pattern, this week’s withdrawals from digital asset investment products are extremely likely to be even larger than those seen in the previous week. Investors in cryptocurrencies will be watching Tuesday’s release of the U.S. Consumer Price Index (CPI) report with bated breath. Concerningly crypto bulls, economists are predicting an increase in month-over-month inflationary pressures that, if confirmed, may worry Fed policymakers and enhance their resolve to take and keep interest rates above 5.0 percent for some time.

This may strengthen the recent upswing witnessed in the U.S. dollar against most of its main G10 counterparts as well as in U.S. government yields, which could put a significant amount of pressure on cryptocurrencies. A rise in the rate of inflation in the United States might send bitcoin prices tumbling toward the $20,500 support zone (the 18th of January low and 50DMA). A break below this level would open the door to a test of the 200-day moving average (DMA), as well as Realized Price in the high $19,000s.

The data on U.S. Retail Sales that will be released on Thursday will also be closely monitored by crypto traders. This data will be used to inform expectations around the likelihood of the United States entering a recession later this year. The investors in the market will also be keeping a close eye on the remarks that will be made throughout the week by a variety of Fed policymakers who will be giving presentations.

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