Citi said Crypto’s weakness stems from slowing ETF flows and fading risk appetite
Wall Street Bank Citi (C) said the latest bout of weakness in the crypto market came despite buoyant equity performance, with sharp liquidity in October leaving a dent in investor confidence.
The Oct. 10 sell-off curtailed risk-taking not only among leveraged crypto traders but also among newer spot exchange-traded fund (ETF) investors, who have since returned, analysts Alex Saunders and Nathaniel Rupert wrote in a Tuesday report.
Flowing to us spot bitcoin ETFs have slowed sharply in recent weeks, undermining what analysts call a critical pillar of support for its bullish outlook.
Bank forecasts assume steady ETF inflows as financial advisors and other investors gradually increase exposure to bitcoin. With momentum stalling, the report warned that sentiment could remain soft.
Onchain data adds to the cautious tone. Analysts noted that large bitcoin holders are shrinking in number while smaller retail holdings continue to rise, a sign that some long-term investors may be selling. Declining funding rates further suggest waning demand for action.
From a technical standpoint, the outlook doesn’t improve either. Bitcoin slipped below the 200-day moving average (SMA), a level Citi said could further weigh on demand given the market’s reliance on such indicators. The bank also attributed Bitcoin’s weakness to tight bank liquidity, as reserves have been drained and short-term rates will remain high.
While the industry is still early in its broader adoption cycle, the report concludes that ETF spot flows will remain a key signal to watch for any turn in crypto sentiment.
Read more: Citi says crypto’s correlation with stocks is tight as volatility returns
