Yesterday saw a negative influx of capital into spot ETFs, reaching -$218 million according to CoinFactiva.com. This is $14 million more than the entire previous week.
Even worse, outflows were recorded for the first time in Fidelity and Valkyrie funds, while BlackRock has shown zero results for the second consecutive day.
As spot ETFs became the leading investment force for Bitcoin in 2024, near-historical outflows provide a good premise for a significant correction.
But it’s not all straightforward. Yesterday, CoinFactiva reviewed the potential impact of capital outflows from China on cryptocurrency growth. This argument is now accompanied by weak preliminary data on the US GDP for the first quarter, which turned out to be almost twice as bad as forecasted.
The economic slowdown puts the Fed in an extremely unpleasant dilemma: raise the key rate to curb inflation or lower it to support the economy. Obviously, leaving everything as is not an option either: there is a growing risk of stagflation, when economic slowdown is accompanied by rising prices. Inflation for March also exceeded forecasts (3.5% versus 3.4%, respectively).
Earlier this year, Jerome Powell, in his capacity as chairman for the first time, criticized the government, stating that the country is on an unsustainable path due to debt growing faster than the economy.
Powell’s dissatisfaction stems from the fact that all the Fed’s efforts are being nullified due to increased government spending and the rising cost of debt servicing. For example, the federal budget deficit last year reached $1.7 trillion, and this year it is likely to exceed $2 trillion as in March 2024 it was already $ -236,456.82395M:
All this undermines the US dollar and adds points to Bitcoin, which was created in 2009 in response to the financial crisis spawned by the modern monetary system.
Unlike fiat money, Bitcoin cannot:
- Be printed to fill budget gaps – issuance is strictly limited to 21 million coins.
- Be used as a weapon, unlike US presidents threatening sanctions on countries opting out of the dollar in international settlements.
- Be lost due to bank bankruptcy or deposit expropriation, as happened in Cyprus in 2013.
