Bitcoin’s bottom may be in — but don’t get your hopes up: It may struggle to go up anytime soon, according to an investment firm.
A Friday report from European asset management firm CoinShares said investors threw fresh cash into Bitcoin — and other crypto — exchange-traded products last week, indicating a change in sentiment.
But other factors could prevent digital asset markets from moving higher, wrote James Butterfill, head of research at CoinShares.
“We have been saying for some time that Bitcoin has probably reached or is close to bottoming out,” the report read. “But we don’t see any significant upside potential from here.”
The report added that current macroeconomic headwinds, such as the US bombing of Iran and rising oil prices, could cause inflation to rise again.
Bitcoin’s price rose earlier this week, hitting a seven-day high of $65,501 on news that US inflation was softer than expected. It has since erased those gains and recently traded at $64,010.
The price of Bitcoin has typically done well on news that inflation is falling because investors expect interest rates to fall. But Butterfill said “a rate cut does not look likely at this stage.”
Bitcoin’s worst run ever
CoinShares’ data showed investors pulled a total of $8 billion out of funds that provided crypto exposure — “the worst run ever.”
Last week, however, things turned around as $287 million hit crypto funds, CoinShares said, with the data so far showing that this week looks set to be another positive streak.
The price of Bitcoin has typically performed well when US investors — previously barred from crypto investing — have bought shares in exchange-traded funds approved in 2024.
The products – handled by the likes of BlackRock, Fidelity and Grayscale – allow more traditional investors or Wall Street institutions to buy positions in Bitcoin via exchange-traded shares.
Since BTC’s October record high of $126,080, the crypto markets have faced an uproar as these investors quickly cashed out. Bitcoin has struggled to make gains, especially after the US and Israel began bombing Iran, leading to a spike in oil prices.
The leading cryptocurrency is now almost 50% below its record high.
“The dominant picture is that the current setup provides interest in adding positions, but caution prevails while sentiment remains broadly negative,” CoinShares added.