Bitcoin Stalls at $70K, Echoes Small Cap Struggles, Wolfe Says

Key Takeaway

• Bitcoin struggles to surpass the $70k resistance, mirroring small caps' challenges, with both affected by rate hikes.
• Despite hitting a record of $73,797.68 in March, bitcoin's near-term outlook remains bleak amid broader equity downturns.
• Long-term bullish sentiment for bitcoin persists, though immediate catalysts like ETF approvals and halving events have passed.

Bitcoin's Stubborn Resistance

Bitcoin's struggle to surpass the $70,000 resistance level has been a focal point for investors and analysts alike. Wolfe Research's Rob Ginsberg highlighted the cryptocurrency's inability to break through this threshold, drawing parallels to the performance of small caps in the Russell 2000. Despite reaching a record high of $73,797.68 on March 14, Bitcoin has since fluctuated within the $60,000 range, facing similar challenges as equities, particularly the small-cap Russell 2000. This comparison underscores the intertwined nature of cryptocurrency and broader market dynamics, with both facing headwinds from rising interest rates and shifting investor sentiment.

ETF Inflows and Outflows

The landscape of Bitcoin ETFs has seen notable shifts, with BlackRock's IBIT ETF ending its 71-day inflow streak, while Fidelity's FBTC and ARK's ARKB registered inflows of $5.6 million and $4.2 million, respectively. Conversely, Grayscale’s GBTC experienced a significant outflow of $130.4 million, marking a broader trend of cautious investor behavior amid uncertain market conditions. This period of stagnation in Bitcoin's price, coupled with the highest cumulative outflow since April 17, reflects a cooling interest in cryptocurrency investments, despite the early enthusiasm that led to over $12 billion in net inflows for spot Bitcoin ETFs.

Strategic Shifts and Regulatory Hurdles

Morgan Stanley's decision to allow its 15,000 brokers to recommend Bitcoin ETFs to clients signals a potential shift in investment strategies towards cryptocurrencies. However, the sector faces regulatory challenges, particularly for Ether ETFs, with Standard Chartered revising its approval expectations due to SEC actions and macroeconomic pressures. These developments indicate a complex landscape for digital asset investments, balancing optimism with caution amid evolving regulatory and economic environments.

Market Caution Amid Outflows

The withdrawal of $218 million from US Bitcoin ETFs underscores a growing market caution, with rising Treasury yields and inflation concerns dampening the speculative appetite for cryptocurrencies. Despite these outflows, Bitcoin's price has shown resilience, maintaining stability above $64,000. This suggests a decoupling of Bitcoin ETF inflows from direct price movements, highlighting the cryptocurrency's robustness against broader market fluctuations. BlackRock Inc.’s IBIT fund's end to its inflow streak further reflects a broader sentiment of crypto-market fatigue, even as the sector prepares for increased competition with the launch of Bitcoin and Ether ETFs in Hong Kong.

Street Views

• Rob Ginsberg, Wolfe Research (Neutral on Bitcoin):

  "Bitcoin continues to demonstrate its inability to successfully get through that stubborn $70k resistance level... It’s the same area where price stalled out in 2021 before going onto fall some 50% from the peak over the next three months." "We have a tough time seeing equities rollover and bitcoin diverging and shooting higher. While we still feel it makes sense to remain a bull over the long term, we simply are not seeing those same kind of compelling signals over the near term."