Wall Street bank Citi ( C ) said the latest bout of weakness in the crypto market comes despite a strong stock performance, with October’s sharp liquidations leaving a dent in investor confidence.
The Oct. 10 selloff curtailed risk-taking not only among leveraged crypto traders, but also among newer investors in spot exchange-traded funds (ETFs), who have since pulled back, analysts Alex Saunders and Nathaniel Rupert wrote in a Tuesday report.
Flowing into US spot bitcoin ETFs have fallen sharply in recent weeks, undermining what analysts called a critical pillar of support for their bullish outlook.
The bank’s forecasts assume steady ETF inflows as financial advisers and other investors gradually add bitcoin exposure. With that momentum stalling, the report warned sentiment could remain soft.
Onchain data adds to the cautious tone. The analysts noted that large bitcoin holders have decreased in number, while smaller retail wallets continue to rise, a sign that some long-term investors may be selling. Falling funding rates further suggest diminishing demand for leverage.
From a technical point of view, the outlook does not improve either. Bitcoin has fallen below its 200-day moving average (SMA), a level Citi says could further weigh on demand given the market’s reliance on such indicators. The bank also linked bitcoin’s weakness to a tightening of bank liquidity as reserves have been drained and short-term interest rates remain high.
While the industry is still early in its broader adoption cycle, the report concluded that spot ETF flows remain the key signal to watch for any turn in crypto sentiment.
Read more: Citi says Crypto’s correlation with stocks is tightening as volatility returns
