Canadian Purpose Bitcoin (BTCC) ETF has seen its Bitcoin (BTC) holdings halve in a single day, suggesting an alarming deterioration in buying sentiment among savvy crypto market investors.
Assets under management of the Purpose Bitcoin ETF decreased by 51%
The fund’s holdings fell from 47,818 to 23,307 BTC between June 16 and 17, its lowest level since October 2021. The 51% drop in BTC holdings is also the largest daily withdrawal in history.
Interestingly, another Canadian cryptocurrency fund, dubbed the 3iQ CoinShares Bitcoin ETF, witnessed similar withdrawals, falling from 23,917 BTC on June 1 to 12,668 BTC on June 17, suggesting that the Purpose fund’s massive BTC withdrawal was not an isolated event.
Are More “Forced Sells” Coming for Bitcoin?
The pullbacks came on the cusp of Bitcoin’s brief break below $20,000, a psychological support level that served as a cap during the 2017 bull run. In particular, BTC price fell as low as around $17,570 on the 20th. June, to recover the USD 21,000 two days later.
However, the huge sell-off of Bitcoin by funds saw record redemption rates from their institutional clients, reportedly invoked by fears that BTC would resume its bear run below $20,000 in what remains. of 2022.
“I’m not sure how they execute the refunds, but that’s a lot of physical BTC to sell in a short amount of time,” he pointed Arthur Hayes, the former CEO of cryptocurrency exchange BitMEX, adding:
“Given the poor state of risk management by crypto lenders and overly generous loan terms, expect more BTC and ETH sell-off declines as the market finds out who is swimming naked.”
A drop below $20,000 is easier now
The withdrawals from Bitcoin ETFs are related to declining risk-asset buying sentiment, led by the Federal Reserve’s increasingly strict stance against rising inflation.
In particular, Bitcoin has fallen more than 70% from its all-time high of $69,000 in November 2021, plagued primarily by the Fed’s benchmark rate hikes and the systematic and wholesale sale of a $9 trillion balance sheet.
On June 15, the US central bank raised interest rates by 75 basis points, their highest level since 1994. Meanwhile, its “dot plot” reveals that it intends to push lending rates to 3.4% at end of 2022, versus the current range of 1.5-1.75%.
That would mean more upside for the year, which, in turn, could further hurt risk appetite, limiting the potential recovery for Bitcoin, as well as the stock market.
“The biggest problem I see right now is a global recession that is just around the corner,” said Paweł Łaskarzewski, co-CEO of the DeFi Launchpad, Synapse Network, adding:
“Because of this, retailers and institutions are too scared and they don’t have the same capital power they did a year ago. So because of the shallow market, it’s much easier to break the $20,000 line, since there may not be enough capital to recover it.
BTC price levels to watch out for
The probability of Bitcoin touching $17,000-18,000 again as support will be virtually guaranteed if the price of BTC breaks back below $20,000.
Meanwhile, continued selling could see BTC drop to $14,000, the May 2019 high. Interestingly, Bitcoin’s Visible Range Volume Profile (VSVR) further indicates the $8,000-10,000 range as the most dominant based on in commercial activity.
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