Bitcoin’s post-halving rally has hit a snag, experiencing its deepest retracement since November 2022, dropping a concerning 23%. Analysts point to a significant factor behind this downturn: outflows from Bitcoin ETFs.
Deepest Retracement in Recent Memory
Since the 2022 bear market bottom, Bitcoin has seen several retracements, but the current one stands out. Rekt Capital’s analysis reveals that the 49-day, 23.6% retracement from March to May 2024 marks the deepest pullback within the ongoing bull cycle. Historically, such dips often precede price increases, offering potential buying opportunities.
ETF Outflows Fuel Selling Pressure
The recent price weakness has been heavily attributed to a sustained exodus from digital asset investment products, particularly Bitcoin ETFs. CoinShares reports a staggering $435 million net outflow over the past three weeks, the highest since March 2024.
Significant withdrawals were observed on April 30th, with GBTC alone experiencing a $93.2 million outflow. This cumulative $161 million daily withdrawal intensified selling pressure on Bitcoin.
Market Uncertainty and Macroeconomic Factors
Bitcoin’s price currently hovers around $57,000, reflecting weakness across various timeframes. Despite a 100% year-to-date increase, the past month has seen an 18% decline, indicating heightened investor uncertainty.
Parth Chaturvedi, from CoinSwitch Ventures, emphasizes that Bitcoin is not immune to broader economic trends. He explains that profit-taking behavior and inflationary pressures are amplifying the price downturn.
Rising Exchange Reserves and Declining Long-Term Investments
On-chain data from CryptoQuant reveals a worrying trend: a rise in the number of Bitcoins held on exchanges. This typically signifies increased selling pressure, as investors move their holdings to exchanges in preparation for selling.
Furthermore, the monthly growth of permanent holders has significantly decreased, dropping from over 200,000 BTC in late March to just 96,000 BTC. This suggests a slowdown in long-term investment inflows, another bearish indicator for Bitcoin’s price.
Path Forward: Rebound in Demand and Curbed Outflows
Bitcoin’s current price trajectory is shaped by a confluence of factors, with ETF outflows being a major driver of the selling pressure. Rising exchange reserves further suggest potential short-term downward pressure.
For the market to stabilize or potentially recover from this “deepest retracement,” a significant rebound in demand and a decrease in outflows from investment products seem crucial.
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