Crypto Fear Signals Bitcoin, Ethereum ETF Flows

What to Know:

• Bitcoin briefly dipped below $87,000 on Christmas Day amid low liquidity and continued ETF outflows.
• On-chain data suggests easing sell pressure and record stablecoin supply, creating market tension.
• XRP-related ETFs are an outlier, showing steady inflows while Bitcoin and Ethereum funds see net withdrawals.

Bitcoin experienced a temporary drop below $87,000 during the Christmas holiday, reflecting the impact of thin liquidity and ongoing outflows from Bitcoin ETFs. Despite the price pullback, underlying on-chain metrics indicate a potential shift in market dynamics. Traders are weighing cautious sentiment against the possibility of sudden price fluctuations as stablecoin reserves reach record levels.

ETF Outflows and Holiday Trading

Market analysis on December 25 placed Bitcoin in a “mild downtrend,” citing consistent ETF withdrawals and selling pressure during U.S. trading hours. Bitcoin briefly fell below $87,000 before recovering, but has struggled to overcome resistance in the $88,000 to $89,000 range. Spot Bitcoin ETFs have seen net withdrawals, with approximately 2,900 BTC (around $251 million) exiting these funds. The trend aligns with data showing a cumulative decrease of nearly $6 billion in BTC ETF inflows since their peak in October. Ethereum funds have followed a similar pattern, remaining net negative on a weekly basis despite minor daily gains.

XRP ETF Inflows Defy the Trend

While Bitcoin and Ethereum ETFs have experienced outflows, diversification flows are apparent in other areas. Solana products have recorded consistent inflows, and XRP-related ETFs have added around $8 million in a recent session. This performance makes XRP funds an exception among crypto ETFs, suggesting continued institutional interest in XRP and its potential.

Bitcoin’s Price Action and Volatility

Bitcoin’s price reflects the current market uncertainty, trading just under $88,000. Volatility has remained subdued, with a 24-hour range between $87,000 and $88,000, and weekly swings between $85,000 and just over $90,000. Compared to the broader market, Bitcoin’s movements have been relatively muted, with liquidity-driven fluctuations overshadowing trend-following activity.

On-Chain Data Suggests Potential Exhaustion

On-chain data offers a more detailed perspective. Whale exchange inflows over the past 30 days are near cycle lows, and Coin Days Destroyed (CDD) is declining, indicating that long-term holders are reducing their selling activity. However, spending from older Bitcoin cohorts has increased slightly, a pattern sometimes observed near significant market turning points. Network activity remains soft, suggesting that demand has not yet fully recovered.

Market Sentiment and Stablecoin Supply

The current market tension is reflected in sentiment indicators, with the Fear and Greed Index in “Extreme Fear.” DeFi borrowing has decreased sharply since August, suggesting reduced leverage in the market. Despite this caution, stablecoin supply has reached a record high of nearly $310 billion, indicating substantial sidelined capital waiting for potential investment opportunities.

Macro Factors and Future Outlook

With equities and gold at record highs and expectations for a pause in interest rate hikes, macro conditions are not overtly unfavorable. However, the next move for crypto depends on ETF flows and post-expiry options dynamics. Until these factors shift, the market may remain fragile, even as signs of seller exhaustion gradually emerge.

Related: Crypto Derivatives Data Signals Massive Growth

Source: Original article