Bitcoin sentiment is starting to improve, but CoinShares says the market is not yet in a position to celebrate.
In a Friday report cited by Bitcoin Magazine, European asset manager CoinShares said investors put fresh money into Bitcoin and other crypto exchange-traded products last week, a sign that sentiment has shifted. Even so, James Butterfill, CoinShares’ head of research, wrote that other forces could still keep digital asset markets from moving meaningfully higher.
“We have said for some time that Bitcoin has probably reached, or is close to, its floor,” the report said. “But we see no significant upside potential from here.”
Fund flows have improved after a record stretch of withdrawals
According to CoinShares data, investors had pulled a total of $8 billion out of funds offering crypto exposure, which the report called “the worst run on record.” That changed last week, when $287 million flowed into crypto funds. CoinShares added that the data so far suggests this week could also end up as another positive stretch.
The firm said the current setup is drawing interest from investors looking to add positions, though caution still dominates because broader sentiment remains negative. In its words, “The dominant picture is that the current setup is prompting interest in adding positions, but caution prevails while sentiment remains broadly negative.”
Macro conditions are still weighing on the market
CoinShares said the main obstacle is the macro backdrop. The report pointed to the US bombing Iran and rising oil prices as factors that could push inflation higher again and limit the room for digital assets to move up.
Bitcoin rose earlier this week after softer-than-expected US inflation data, reaching a seven-day high of $65,501. Those gains did not hold. It was recently trading at $64,010.
Bitcoin has often responded well when inflation appears to be cooling, because investors tend to expect lower interest rates in that environment. Butterfill, however, said “a rate cut does not look probable at this stage.”
ETF demand remains central to Bitcoin trading
The report also highlighted the role of US exchange-traded funds approved in 2024. Those products, managed by firms including BlackRock, Fidelity, and Grayscale, opened a route for more traditional investors and Wall Street institutions to gain Bitcoin exposure through shares traded on stock exchanges.
Bitcoin has typically benefited when US investors buy into those vehicles. But since BTC’s October all-time high of $126,080, crypto markets have come under pressure as those investors quickly pulled money from the funds. Bitcoin has had trouble building gains, especially after the US and Israel started bombing Iran, which was followed by a surge in oil prices.
The largest cryptocurrency is now nearly 50% below its record. The story first appeared on Bitcoin Magazine and was written by Mathew Di Salvo.