Crypto fund outflows exceed $500 million in the past five weeks, BTC spot trading volume is at its lowest level in 6 months

As investors' risk appetite decreases, crypto market transactions are not active. According to Bitpush terminal data, Bitcoin has been hovering between $41,200 and $42,500 in the past 24 hours, with volatility further narrowing, and it is unclear whether it is going up or down.

Currently, the overall market sentiment for cryptocurrencies and traditional stocks tends to be negative, mainly due to the Fed's tapering signals and the uncertainty of the impact of the Omicron variant on the economy. As U.S. Treasury yields rise further, investors seem to be abandoning risky assets such as technology stocks and cryptocurrencies and investing in less volatile assets such as cash and index ETFs. In addition, with the approaching date of the Fed's interest rate hike, the uncertainty among investors may be further exacerbated.

Crypto funds suffer outflows for fifth straight week

Bearish market sentiment has not subsided, and investors have withdrawn funds from cryptocurrency funds for the fifth consecutive week. According to a report released by crypto company CoinShares, in the seven days ending January 14, crypto investment products outflowed $73 million, and the total outflow of crypto funds in the past five weeks exceeded $500 million. Calculated as a percentage of total assets under management (AuM), this is the worst outflow since 2018, which indirectly indicates that institutional investors have reduced their exposure to digital assets.

Bitcoin investment products were hit the hardest, accounting for $53 million of the $73 million outflow last week, and a total of $317 million in outflows in four of the past five weeks. Bitcoin's total assets under management (AuM) hit a three-month low of $ 35 billion midweek. Ethereum investment products accounted for the majority of the remaining outflows, with $50 million outflows last week and $230 million in outflows over the past five weeks.

BTC spot trading volume hits 6-month low

The ongoing fear, as well as the recent low volatility, may be making traders hesitant. Bitcoin spot trading volume remains at its lowest level in six months, according to data.bitcoinity.org.

Derivatives traders are also taking a cautious approach, as leverage in the bitcoin futures market is skewed to the bearish side. This means that if the price of BTC starts to rise, short traders, or those betting on a price drop, could be forced to close their positions, and rapid liquidations could lead to high volatility.

Alexander Mamasidikov, co-founder of digital bank MinePlex, commented: “Main cryptocurrencies are not rising because retail and, most importantly, institutional investors are not taking action”. Therefore, Bitcoin’s rebound despite macroeconomic headwinds may depend on large investors entering the market at current price levels or lower.

TheRealPlanC, an anonymous crypto analyst on Twitter, pointed out that Bitcoin is entering the third stage of the "emotional roller coaster" (Hope), and it should be able to witness a rebound if it remains above $40,000.

Market analysts expect Bitcoin to remain in a narrow range in the short term and continue to test the $40,000 support and $44,500 resistance levels until broader market pressure emerges, and Ethereum and other altcoins with higher volatility will maintain a consistent trend with Bitcoin. The release of the U.S. initial jobless claims report on Thursday could be a catalyst for Bitcoin to break below support or break through resistance.