Wall Street bank Citi (C) said the latest bout of cryptocurrency market weakness comes despite buoyant stock performance, and sharp selloffs in October dented investor confidence.
The Oct. 10 sell-off reduced risk-taking not only among leveraged cryptocurrency traders but also among new investors in exchange-traded funds (ETFs), who have since pulled out, analysts Alex Saunders and Nathaniel Rupert wrote in a Tuesday report.
Flows into US bitcoin spot ETFs have slowed sharply in recent weeks, undermining what analysts called a critical pillar of support for their positive outlook.
The bank’s forecasts assume continued ETF inflows as financial advisors and other investors gradually add exposure to bitcoin. With that momentum stalling, the report warned that confidence could remain weak.
On-chain data adds to the cautious tone. Analysts noted that large bitcoin holders have been dwindling in number, while smaller retail portfolios continue to rise, a sign that some long-term investors may be selling. Falling funding rates also suggest lower demand for leverage.
From a technical point of view, the prospects are not improving either. Bitcoin has fallen below its 200-day moving average (SMA), a level that Citi says could further weigh on demand given the market’s reliance on such indicators. The bank also linked bitcoin’s weakness to tightening bank liquidity as reserves have been depleted and short-term rates remain high.
While the industry is still in the early stages of its broader adoption cycle, the report concluded that ETF spot flows remain the key signal to watch for any shift in crypto sentiment.
Read more: Citi Says Crypto Correlation to Stocks Tightens as Volatility Returns
