Citi Says Crypto’s Weakness Stems From Slowing ETF Flows and Fading Risk Appetite

Core Insights - The recent weakness in the crypto market is occurring despite strong equity performance, leading to diminished investor confidence due to significant liquidations in October [1] - A slowdown in inflows into U.S. spot bitcoin ETFs has undermined the positive outlook for bitcoin, which relies on steady ETF inflows from financial advisors and investors [2] - Onchain data indicates a decrease in large bitcoin holders and an increase in smaller retail wallets, suggesting that long-term investors may be selling [3] Market Sentiment - The decline in funding rates points to a decrease in demand for leverage, reflecting a cautious market sentiment [3] - Bitcoin's price has fallen below its 200-day moving average, which could further dampen demand as the market often relies on such technical indicators [4] - The tightening of bank liquidity, characterized by drained reserves and high short-term rates, is linked to bitcoin's current weakness [4] Future Outlook - The report emphasizes that the flows into spot ETFs are a critical signal to monitor for any potential shifts in crypto sentiment, as the industry is still in the early stages of broader adoption [5]