The outflow of Bit ETFs has increased rapidly, raising concerns about a bear market. Other hopes, such as state Bitcoin reserves, have also failed, and it is difficult to find a clear upward trend.
Industry experts like Arthur Hayes predict that the losses will be temporary and that there will be a strong rebound by the end of the year. However, this will be the first major price collapse after ETF approval and institutional adoption, and non-cryptocurrency investors may behave in unpredictable ways.
Is Bit heading for a bear market?
Bit, the world's first and largest cryptocurrency, has recently shown a downward trend. MicroStrategy has spent nearly $2 billion on its assets, but the stock price has fallen sharply. Widespread economic headwinds are having a real deterrent effect.
Several worrying trends are fueling speculation about a Bit bear market:
"Bit Goblin Town is coming: Many IBIT holders are hedge funds trying to earn higher returns than short-term US Treasuries by buying ETFs and selling CME futures. As Bit falls, the underlying collapses, and these funds will sell IBIT and buy back CME futures." - Arthur Hayes, former CEO of BitMEX
Hayes also mentioned his prediction in January and argued that the asset will drop to $70,000. This bear market will not last forever, and Bit will rebound by the end of the year, but it will first go through considerable pain.
Hayes' prediction was centered on the US Bit ETF market, which is under its own pressure.
These ETFs are showing signs of a bear market due to the simple correlation that Bit tends to fall along with traditional stocks.
There is a large demand for institutional investment, but in some ways it is very shallow. If the potential returns of BTC decrease, investors will look elsewhere. This has been proven by substantial outflows.
This daily outflow exceeds $500 million from just the top 10 ETFs. However, the entire market recorded an outflow of $585 million last week, the worst in 5 months.
If ETF outflows continue to accelerate at this dramatic pace, a Bit bear market seems very likely.
Failed expectations of Bit reserves... Enthusiasm wanes
Political developments failing to meet expectations could also lead to additional downward pressure. In particular, many US states have begun efforts to implement Bit reserves, which could trigger up to $23 billion in BTC purchases.
However, some Republicans are obstructing these efforts nationwide. Along with other frustrations, can Bit withstand this great disappointment here?
In summary, many factors are making a Bit bear market a credible outlook. However, the industry is accustomed to harsh price volatility. Hayes and other commentators argue that the worst case will be temporary and that there will be a rebound by the end of 2025.
Therefore, the only question is how the non-cryptocurrency investor class will handle these cyclical patterns. After Bit ETFs were approved in 2024, the industry has not yet experienced a true bear market equivalent to previous collapses.
Institutional investors have recently invested billions of dollars in cryptocurrencies, but it is uncertain how they will handle the inherent volatility of this industry.
