Recent Bitcoin from Strategy (MSTR) The selling has had a huge impact on market sentiment, but Wall Street bank Citi says spot bitcoin exchange-traded fund (ETF) flows are the main driver of BTC prices.
Markets were shaken after Strategy disclosed the sale of a small portion of its bitcoin holdings, marking a rare departure from Chief Executive Michael Saylor’s traditional “buy and hold” approach. The largest cryptocurrency has fallen 9% since Sunday and earlier Wednesday fell to the lowest level since March.
The sale should not have been a surprise, the bank said. Chief Executive Michael Saylor mentioned plans to divest certain tax-disadvantaged bitcoin holdings as part of a portfolio optimization effort during his first-quarter earnings call. A bigger problem is the lack of investor demand.
“Recent flows have been negative and the chances of passage of a US market structure bill (a potential catalyst for renewed investor interest in our view) are diminishing,” analyst Alex Saunders wrote in Tuesday’s report.
Saunders said spot bitcoin exchange-traded fund (ETF) flows remain the main driver of BTC prices, estimating that they account for around 45% of the weekly performance change. ETFs have seen a record 11 consecutive days of net outflows, which he said indicates a broader lack of investor demand for the cryptocurrency.
The report also warned that the chances of a US crypto market structure bill being passed this year appeared to be declining, reducing the likelihood of a near-term catalyst for new investor inflows.
Combined with bitcoin’s underperformance relative to stocks, fading legislative prospects are likely to keep sentiment muted in the absence of regulatory progress or renewed concerns about fiscal sustainability, the report added.
Read more: Bitcoin faces huge quantum threat as computing advances accelerate, says Citi
UPDATE (June 3, 14:10 UTC): Add BTC performance this week, record ETF outflow streak)
