Bitcoin Faces Worst Month Since FTX Crash With ETF Demand Cooling
Bitcoin is registering its worst month since the collapse of Sam Bankman-Fried’s FTX empire as the euphoria around US exchange-traded funds for the largest digital asset subsides.
(Bloomberg) -- 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% in April as a mania for US spot-Bitcoin exchange-traded funds flatlined after earlier lifting the token to a record high of almost $74,000 in March.
Tuesday’s debut of Bitcoin and Ether ETFs in Hong Kong also failed to provide a tailwind. Trading volume for the six vehicles totaled $12.7 million on the first day, sizable locally but smaller than the $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 Federal Reserve to signal a delay in rate cuts after officials conclude a policy meeting Wednesday. The latest US data highlighted a climb in labor 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 like digital tokens.
The recent moves higher in Treasury yields and real rates have been “toxic for gold, Bitcoin and US equity,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note.
Bitcoin shed 3% as of 8:25 a.m. Wednesday in London to trade at about $58,000, a two-month low. Smaller tokens such as Ether and the meme-crowd favorite Dogecoin also nursed losses.
ETF Outflows
A net $182 million was pulled from the group of almost a dozen US spot-Bitcoin ETFs last month through April 29, according to data compiled by Bloomberg. The funds saw $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,” Seth Ginns, Coinfund’s managing partner and head of liquid investments, said 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,” Matteo Greco, research analyst at Fineqia International, wrote in a note.
--With assistance from Sonali Basak, Sidhartha Shukla, María Paula Mijares Torres and Dave Liedtka.
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