Bitcoin’s recent decline below the $60,000 mark is largely attributed to significant selling activity in exchange-traded funds (ETFs), according to Markus Thielen, founder of 10x Research. In a report released Monday, Thielen indicated that the market has misinterpreted the reasons behind the cryptocurrency’s downturn, which has been exacerbated by rising inflation rates.
Thielen pointed out that since the U.S. inflation data for April exceeded expectations on May 12, bitcoin ETFs listed in the U.S. have experienced net redemptions totaling approximately $5.4 billion. This trend has overshadowed other factors, such as the recent bitcoin sale by MicroStrategy, which has been scrutinized by investors. Thielen emphasized that the focus should not be on MicroStrategy’s actions but rather on the broader institutional selling occurring through ETFs.
Despite MicroStrategy acquiring about $2 billion in bitcoin during this period, Thielen argued that the narrative surrounding the company is misleading. “The market has misdiagnosed this selloff,” he stated, asserting that MicroStrategy is not the primary issue affecting bitcoin’s price.
Looking ahead, Thielen noted that the upcoming consumer price index (CPI) report for May could significantly influence bitcoin’s trajectory. His analysis suggests that inflation may rise to 4.3%, surpassing both the previous month’s figure of 3.8% and Wall Street’s consensus estimate of 4.2%. A CPI reading above 4% could heighten fears that the Federal Reserve will maintain higher interest rates for an extended period or even consider further hikes.
This scenario poses challenges for risk assets, including cryptocurrencies. Earlier this year, many market participants anticipated multiple interest rate cuts, but recent inflation and labor market data have shifted sentiment, leading traders to reassess the likelihood of easing measures.
While bitcoin may appear oversold after its recent downturn, Thielen cautioned against assuming that any short-term recovery signals a lasting rebound. He predicted a potential relief rally early in the week, but warned that it could quickly dissipate if inflation data surprises on the upside.
The overall flow of capital into the crypto market remains weak, as indicated by a net outflow of approximately $1.7 billion in stablecoins last week and $5.5 billion for the month. Additionally, bitcoin futures open interest has sharply declined, reflecting reduced trader exposure.
Thielen concluded that ETF flows are crucial for understanding bitcoin’s future movements. “Institutional ETF flows are driving price,” he remarked. “Follow the money, not the narrative.”
Bitcoin's recent price drop is primarily linked to significant ETF selloffs driven by rising inflation concerns, rather than specific corporate actions. The upcoming CPI report is anticipated to further influence market dynamics.