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Bitcoin (BTC/USD) Eyeing a Deeper Reversal as ETF Outflows Continue

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  • Bitcoin’s price faces downward pressure amid global recession fears and ETF outflows.
  • Short-term Bitcoin holders are feeling the pain, while long-term investors remain profitable.
  • A deeper pullback is possible, with Bitcoin currently 22% below its all-time high.

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Bitcoin prices have struggled to gain momentum of late with the fear and greed index remaining in fear territory. Global markets fears around a potential recession are weighing on the crypto market.

Source: FinancialJuice

Bitcoin bulls have failed to make a move above the $65k handle and that has resulted in consistent selling pressure on the world’s largest cryptocurrency. Despite this the average bitcoin investor remains profitable, it is the short-term holders who are facing challenges at present.

According to Glassnode research the last 3 months or so has seen a notable shift as downward price pressure has increased. Thus it is important to pay attention and assess the unrealized loss held by investors to evaluate the financial stress they are experiencing. 

From the perspective of the broader market, unrealized losses remain historically low. Total unrealized losses amount to just 2.9% of the Bitcoin market cap, which is historically low. This suggests that the aggregate investor remains relatively profitable, even in the face of continued price declines

Source: Glassnode

There is also further room for downside if one considers that bitcoin is currently trading around 22% down from its all-time high. In terms of historical bitcoin bull markets this is a relatively shallow drawdown hinting at the potential for a deeper pullback.

Bitcoin’s struggles this week is somewhat of a surprise given that markets have gotten even more aggressive on the rate cut front. US data this week has seen the probability of a 50 bps rate cut increase. This would in theory lead to more disposable income for consumers and thus should lead to optimism around the price of bitcoin, but this has failed to materialize when looking at the bitcoin price.

ETF Flows

Also raising a red flag of late has been an increase in ETF outflows. According to Arkham Intelligence data released yesterday, 8 bitcoin ETF recorded outflows around $287 million dollars in the span of 24 hours. The only exception being BlackRock. This was the fifth consecutive day of outflows for bitcoin ETFS and market participants may be starting to ask… Is this a sign that investor confidence may be waning?. 

Ethereum spot ETFs saw a total net outflow of $47.4 million. Grayscale’s ETF (ETHE) had a $52.3 million outflow, but this was partly balanced by Fidelity’s ETF (FETH), which had a $4.9 million inflow. The overall value of Ethereum spot ETFs is now $6.758 billion, according to the data.

Technical Analysis BTC/USD

Bitcoin is currently down about 3% today and might close below the important support level of 56,561. If it does, there’s a chance it could drop towards the 50,000 mark, which is a significant psychological level.

What’s interesting is that this support level at 56,561 has been strong since early August, even after a market selloff. To reach 50,000, Bitcoin needs to get past the support levels at 55,000 and 53,965.

On the other hand, if Bitcoin tries to climb higher, it must first break through 58,500 before aiming for 60,000.

Bitcoin (BTC/USD) Daily Chart, September 5, 2024

Source: TradingView.com (click to enlarge)

Support

  • 55000
  • 53965
  • 50000 

Resistance

  • 58500
  • 60000
  • 61555 

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Zain Vawda

Zain Vawda

Market Analyst at OANDA
Zain is an experienced financial markets analyst and educator with a rich tapestry of experience in the world of retail forex, economics, and market analysis. Initially starting out in a sales and business development role, his passion for economics and technical analysis propelled him towards a career as an analyst.

He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.

He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.
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