Bitcoin A drop below $60,000 may have less to do with the Michael Saylor Strategy (MSTR) and more to do with rising inflation, one analyst argued.
In a report on Monday, Markus Thielen, founder of 10x Research, wrote to his clients that investors have largely misinterpreted the factors behind the sharp sell-off in cryptocurrencies in recent weeks. While much of the market focused on Strategy’s first bitcoin sale since 2022 and the potential surplus if the largest corporate holder sells more, the bigger story has been a wave of institutional selling through spot bitcoin exchange-traded funds (ETFs), he said.
Since April’s US inflation report came in higher than expected on May 12, US-listed bitcoin ETFs have recorded approximately $5.4 billion in net redemptions, Thielen noted. During the same period, Strategy accumulated around $2 billion worth of bitcoin, making it one of the few major buyers in the market.
“The market has misdiagnosed this sell-off,” Thielen wrote. “Strategy is not the problem.”
Thielen said attention should now turn to Wednesday’s May consumer price index report, which could determine whether bitcoin’s recent correction deepens or stabilizes.
The 10x model forecasts annual inflation to rise to 4.3%, above both the previous month’s 3.8% reading and Wall Street’s consensus estimate of 4.2%. A reading above 4% could reinforce concerns that the Federal Reserve will need to keep interest rates high longer, or even consider additional increases, according to the report.
It would be bad news for risk assets. Markets began the year expecting multiple rate cuts, but after a series of higher-than-expected inflation and labor market readings, traders are now ruling out easing altogether and increasingly discussing the possibility that the Fed’s next move could be an increase rather than a cut.
While Bitcoin appears technically oversold after its recent decline, Thielen cautioned against treating a short-term rebound as the start of a sustained recovery. The firm hopes that Bitcoin could see a relief rally early in the week, but the move is likely to fade if inflation surprises to the upside.
The overall flow outlook also remains weak, 10x Research said. Stablecoins recorded approximately $1.7 billion in net outflows last week and $5.5 billion over the month, suggesting capital is leaving the cryptocurrency market. Meanwhile, bitcoin futures open interest has fallen sharply as traders reduced their exposure.
Thielen said ETF flows remain the key metric to watch in assessing bitcoin’s next move. “Institutional ETF flows are driving prices,” he wrote. “Follow the money, not the narrative.”
Read more: Bitcoin’s fall does not have a single cause. AI, tech IPOs, quantum and selling strategies all play a role, says NYDIG
