Crypto Funds Encounter Third Weekly Loss, With $3 Billion in Outflows

Recently, the Kobeissi Letter highlighted a troubling trend in capital markets, revealing that crypto-focused funds faced significant outflows, totaling $2 billion just last week. This marks the highest withdrawal rate since February, contributing to a cumulative outflow of $3.2 billion over the last three weeks.

Key Takeaways

Crypto funds have seen $3.2 billion in outflows over three weeks.
Bitcoin (BTC) faced withdrawals of $1.4 billion, while Ethereum (ETH) saw $689 million leave.
Average daily outflows relative to assets under management have reached unprecedented levels.
Current market sentiment remains negative, particularly for Bitcoin.
Expert Lark Davis suggests potential scenarios for Bitcoin's future over the coming weeks, including possibilities of further declines or a recovery by year-end.
Concerns over Bitcoin's price stability are heightened by the precarious position of companies like Strategy, previously MicroStrategy.

Crypto

Bitcoin and Ethereum: Major Withdrawals

Leading the recent outflows, Bitcoin (BTC), the foremost cryptocurrency, suffered notable withdrawals of $1.4 billion, while Ethereum (ETH), ranked second, recorded exits of $689 million. The cumulative effect of these withdrawals, combined with a drop in prices, has resulted in a staggering 27% decrease in total assets under management, which now stand at $191 billion. The Kobeissi Letter has termed this situation a “structural decline.”

Market sentiment is predominantly negative, particularly concerning Bitcoin. Analyst Lark Davis analyzed current trends based on key moving averages, observing that as long as Bitcoin remains below the 50-week exponential moving average (EMA), which is slightly above $10,000, it will continue to be in bear market territory.

Crypto The daily chart reflects an intensified downtrend of BTC. Source: BTCUSDT on TradingView.com

Davis raised questions regarding the ongoing downturn. He speculated whether this decline indicates a severe bear market or merely a temporary dip similar to April's, where Bitcoin had a notable drop but did not breach the 50-week EMA after surpassing the 200-day EMA.

Three possible scenarios for Bitcoin's future were proposed by Davis. The first suggests a further descent into “goblin town” without recovery, which he considers unlikely due to current oversold conditions. The second scenario describes a short-term rally that tests the 50-week EMA, potentially drawing investors back, followed by another downturn. Davis’s preferred scenario indicates that Bitcoin may reclaim the 50-week EMA by year-end, driven by easing macroeconomic conditions such as interest rate declines and favorable market valuations.

Intensifying Market Turmoil

Further compounding these concerns is the unstable situation surrounding Strategy, previously known as MicroStrategy, led by Bitcoin advocate Michael Saylor. Jacob King, CEO of SwanDesk, noted that if Bitcoin were to dip further, falling below Strategy’s average purchase price of just below $80,000, the firm’s Bitcoin holdings could be jeopardized.

Crypto Strategy’s median Bitcoin average buy price is just below $80,000. Source: Jacob King on X

King expressed his worry that, should Bitcoin prices continue to fall, forced liquidations might occur again within the crypto investor community, pressuring Bitcoin prices toward or below the $10,000 mark due to increased selling activity.

His commentary represents a wider skepticism about the sustainability of the crypto market's structure. King specifically criticized the investment strategies related to Bitcoin as being reliant on “unsustainable fraud and hopium.” He recalled past statements by Saylor, who encouraged extreme financial measures—like taking out double mortgages and selling personal assets—to invest in Bitcoin, indicating that the current market unrest shouldn't be surprising.

As of this writing, Bitcoin was trading at $84,700, more than 30% lower than its all-time high of $126,000, which it reached earlier in October.

Featured image from DALL-E, chart from TradingView.com