Bitcoin’s Downturn May Last for Months Due to Weak ETF Interest

ETF Flows Remain Negative Despite Brief Gains

When looking at daily ETF activity, the numbers can be quite erratic. Some days show strong inflows, while others reveal considerable selling. Yet, if you look at the bigger picture, a different story comes to light.

Over the past 10 business days, the cumulative net flow has dropped by roughly 18,000 BTC. The Spot Bitcoin ETF has seen four weeks of consecutive outflows, totaling a loss of $360 million just this week. A minor inflow of $15.2 million on Friday hardly made a dent.

Ecoinometrics suggests that isolated days of positive performance don’t signify a broader shift. Real trend changes require a consistent influx of capital over a series of weeks, not just sporadic “green days.”

Historical Drawdowns Don’t End Quickly

Historical analysis from Econometrics shows the correlation between drawdowns in both Bitcoin and the Nasdaq 100 in terms of their duration and intensity. The longer these drawdowns persist, the deeper they often go before reaching a bottom.

Currently, Bitcoin has been in correction mode for 128 days, with its lowest point dropping more than 50%. Beyond 100 days of a drawdown, recovery usually spans months, if not years.

This pattern is echoed in the Nasdaq 100, which is also experiencing a prolonged drawdown. This is significant because Bitcoin tends to follow the movements of growth stocks, especially when they’re under pressure.

The Economy’s Strength Poses Challenges

Interestingly, US retail sales continue to align with long-term growth trends. Consumer spending remains strong, which isn’t typical behavior during a recession.

This vitality in the economy is why the Fed isn’t rushing to lower interest rates. They maintained rates between 3.5% and 3.75% in January, and the market anticipates a potential cut no earlier than June.

Without any interest rate reductions, we may face ongoing challenges for a while, putting pressure on risk assets, Bitcoin included.

Key Considerations for Bitcoin Holders

Investors should pay attention to sustained buying pressure rather than focusing on short-term ETF inflows or temporary market surges.

Ecoinometrics concludes that there’s currently no evidence of a return of capital to risky assets. Trying to time the market during such a slow correction often costs more than it’s worth. So, exercising patience seems to be the best strategy right now.