Bitcoin’s breakdown: ETF outflows and Macro pressure hit crypto sentiment

Bitcoin is falling for a second straight day, dropping to 3% over the past 24 hours and 8.5% over the past 7 days. BTC trades below 104k at the time of writing, down 21% from its record high. 

The selloff is seen across the crypto market, with Ethereum trading 5% lower over the past 24 hours and 14% lower over the past 7 days. XRP has also dropped 5%, while BNB is down 6% over the past 24 hours. The total cryptocurrency market capitalisation has fallen 3.5% to $3.47 trillion, a level last seen in July.  

The sharp move lower has sparked a liquidation event, with the crypto market recording $1.33 billion in liquidations over the past 24 hours, of which $1.27 billion were long positions and just $159.9 million were short positions. While this is considered a significant liquidation event, it is still notable below the $20 billion liquidation event on October 10, the highest ever. 

Institutional BTC appetite wanes and LTHs sell 

Bitcoin has fallen as institutional demand has decreased substantially over the past week. BTC ETFs recorded $187 million in net outflows on Monday, marking the fourth straight day of outflows. BTC ETFs have seen outflows of $1.67 billion since October 11. These outflows signal that institutional appetite for BTC exposure through ETFs has weakened after a period of aggressive buying earlier in the year. BTC ETFs were a key contributor to BTC’s rally to its 126.2k record high.  It therefore makes sense that persistent outflows also accelerate a bearish move.  

Notably, institutional demand for BTC has fallen below daily mining output for the first time in 7 months, putting the supply-demand equation in focus and raising concerns about Bitcoin’s stability. 

Adding to the deteriorating outlook, Long Term Holders are also unloading in size. According to Lookonchain, $1.5 billion in deposits have moved from legacy wallets to major exchanges, including Coinbase, Binance, and Kraken. This is often a sign of locking in profits or hedging. 

Macro pressures 

These moves come amid ongoing macro pressure. Bitcoin has struggled to hold onto gains after Federal Reserve Chair Jerome Powell warned that a December rate cut was not a foregone conclusion. According to the CME FedWatch tool, the market now sees only a 67% chance of a rate reduction next month, down from 90% before the meeting. 

Moreover, the ongoing US government shutdown means that US data remains scarce, leaving the Fed and the markets flying towards the next policy decision: US ADP payroll figures and ISM services PMI figures tomorrow. 

BTC technical analysis 

After facing rejection at 115k, the 50 SMA at the end of December BTC/USD has fallen lower, breaking below its 200 SMA and its multi-month rising trendline to a low of 103.5k. The break below these support levels, the bearish engulfing candle, and the RSI below 50 keep sellers optimistic of further downside. 

Sellers will look to take out 103.5k, the October 17 low, to extend losses towards the 100k support zone —the psychological level —and the 50% Fib retracement of the 74.6k low and 126.2k high. Below here, 95k comes into focus. 

Any recovery would need to rise above 110k, the psychological level, and the 200 SMA. A rise above here brings the 50 SMA and 115k back into focus. 

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