Bitcoin Fund Outflows Hit 17-Month Low, Is Bullish Run Imminent?

Key Points:

• Bitcoin funds have seen a significant outflow of coins, reaching a 17-month low of 826,113 BTC, amounting to $409 million.
• The decline in fund balance suggests a lack of institutional participation in bitcoin’s recent rally, driven by safe-haven demand and renewed hopes for Federal Reserve rate cuts later this year.

This month, Bitcoin funds have seen a significant outflow of coins, amounting to 16,560 BTC ($409 million), reaching a 17-month low of 826,113 BTC, as per CoinDesk.

This decline is primarily attributed to close-ended funds, spot and futures-focused exchange-traded funds (ETFs) in Europe, the U.S. and Canada. ETFs are often considered a proxy for institutional activity, and this decline in fund balance suggests a lack of institutional participation in bitcoin’s recent rally, which has been driven by safe-haven demand and renewed hopes for Federal Reserve rate cuts later this year.

The gains, however, may indicate bitcoin’s strengthening appeal as a hedge against the banking system. Bitcoin picked up a strong bid near $19,600 late last Friday after Silicon Valley Bank, formerly one of the top 20 lenders in the U.S., shut operations. Since then, prices have risen over 25%, reaching a nine-month high of $26,500 on Tuesday.

Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk that “institutions aren’t buying the narrative that BTC is serious and here to stay,” adding that the wealth management industry is globally light in both bitcoin and gold. However, Morris also cautioned against drawing conclusions from the data, saying that a large outflow from a single fund is primarily responsible for dragging the tally lower.

Markus Thielen, head of research and strategy at Matrixport, also said that the balance held in funds accounts for a small portion of the total market, and other sources of demand are lifting prices higher. He noted that the fund holdings data is not meaningful and suspects that USDC holders are converting their stablecoin into BTC. Binance recently announced that it is converting $1 billion worth of funds held in BUSD to bitcoin, BNB and ether.

While the decline in the balance held in funds does not necessarily mean that the price rally lacks strength and is unsustainable, it highlights the importance of monitoring the market’s fluctuations as institutional investors continue to assess bitcoin’s potential as a safe-haven asset.

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