Bitcoin’s Recent Weakness Is More Tied to Global Markets Than to Anything Crypto Specific, Coinbase Says

The report stated that both stocks and gold fell along with Bitcoin.

Bitcoin’s recent pullback is below its historical range, Coinbase said.

The note stated that price discovery of the cryptocurrency is still based on global demand trends.

Bitcoin’s {{BTC}} recent weakness is not unique to crypto markets and is therefore not indicative of sector-specific capitulation, Coinbase (COIN) said in a research report on Friday.

Coinbase notes that both stocks and gold have been trading lower since hitting highs in mid-April, driven by a strengthening dollar. The world’s largest cryptocurrency fell 16% in April, its biggest monthly decline since June 2022.

“What makes us optimistic about this pullback is that BTC’s maximum decline from the peak is at 23%, below its historical range,” analysts David Han and David Duong wrote.

“We believe this overall decreasing trend will continue as BTC is legitimized as a macro asset,” the authors wrote. This has been reinforced by spot exchange-traded funds (ETFs) in the US, Canada and Europe, as well as the recently launched ETFs in Hong Kong and new applications in Australia.

While inflows to overseas ETFs were not as large as those seen in the US, “we believe they represent an important signal for regulatory engagement in the asset class globally,” the report said.

Blackrock’s largest spot bitcoin ETF, iShares Bitcoin Trust (IBIT), ended its 70-day inflow streak and saw its debut on Wednesday, the report said. “While this may indicate a slowing of capital inflows into the asset class through the ETF product, we believe ETF flows are only driving a portion of BTC price discovery, given the global and deeply liquid markets on centralized exchanges (CEXs).”

“Average weekday spot volume on CEXs in Q24 was $18.8 billion, more than eight times the $2.3 billion daily volume of U.S. spot ETFs during the same period,” the note said. “This inconsistency in activity leads us to believe that Bitcoin’s price discovery is still based on global demand trends.”

The problem with looking at U.S. ETF inflows as a proxy for global price discovery is most evident with gold, Coinbase said. SPDR Gold Shares, the largest gold ETF in the U.S., has a net outflow of $3 billion in 2024 even as the precious metal is up 12% year-to-date.

Read more: JPMorgan Says Crypto Market Sell-Off Driven by Retail Investors