Bitcoin is lower after breaking the 200 day moving average and also falling to 4 month lows.
The crypto bear market taking a breather with Bitcoin bouncing briefly back above the $64,000 level after a brutal tumble below 62,000.
And in New York morning trade, we are looking at the crypto major holding right above that level.
Now despite the relief rally, roughly half of all Bitcoin in circulation currently held at a loss, and Michael Sailor as well as strategy to startled the market by selling Bitcoin for the first time in years to help fund massive corporate dividends.
Meanwhile, billions of dollars are rotating out of crypto and into hot AI as well as upcoming mega IPOs while joining me on the. of the latest jobs report to weigh in on what's happening in crypto is Thomas Perfumo, Chief Economist at Kraken, good morning.
Thank you so much for joining us.
There's been a lot of brutal selling across crypto this week, but what do you think is actually driving the money out of the market right now and how concerned should everyday investors be?
Yeah, good morning.
I appreciate you having me on.
I I think the thesis that you were meant to more popular narratives like AI or even the upcoming.
SpaceX IPO is really driving a lot of investor attention, and we see that in the Bitcoin ETF flows in particular.
We're now in a 13 day, the longest sequential daily streak of net outflows where they've sold over $4 billion of bitcoins over the last two weeks and so.
Seeing it in the data that investors are now flocking into other opportunities near term.
I personally think it's a big rotation of liquidity up into this upcoming IPO, and we're seeing a little bit more of an exacerbation in price levels as a result, but I do expect that that may course correct in the short term after we get through this liquidity crunch.
And there are a lot of headlines out there regarding the crypto big investors dumping certain crypto tokens to prepare for massive new tech IPOs such as the ones that you mentioned.
But do you think this current obsession with AI as well as stock listings are pulling meaningful liquidity away from digital assets.
You mentioned that you expect this to stabilize, but what happens to the price of some of these tokens out there?
Sure, so when I think about the Bitcoin ETFs, 11 thing to keep in mind is that they've become such a popular and such a successful product that they do have to compete head on against the latest narratives that that are going on in the investor community space.
And so from a data perspective, Since inception, the ETFs have purchased $55 billion worth of Bitcoin net capital inflows, and that's only $8 billion shy of the high water mark of $63 billion that we saw in October of last year.
And so even though we had a 50% drawdown in price, Bitcoin ETFs have retained.
About 90%, just under 90% of the total net flows from a high water mark perspective, so it speaks to some level of resilience here.
But when you have a daily net selling every single day for 13 days in a row, it can be quite rough on the market and create this dislocation.
And my personal view is that when you Have liquidity dislocation, it can feel very zero-sum because you have investors indiscriminately selling assets to raise money so they can go buy others.
So if you look at the DRAM ETF for example, it was launched two months ago, it's already attracted more than $10 billion of net inflows.
If you look at the SpaceX IPO, $75 billion biggest IPO in history.
Google's raising $80 billion over the next few months.
There's a lot of need for capital in the market.
Bitcoin is very sensitive to liquidity conditions within capital markets, and I think that this has been a very acute selling pressure over a very short time frame trying to meet those demands for, in this case, the SpaceX IPO.
11 added data point I'll give you for fun, uh, I was looking at the US search trends on Google last night, and there's only been two moments in the last 6 years.
Is that SpaceX, as the first was in May 2020 when SpaceX had its first manned mission, excuse me, manned space mission with their, their Dragon crew vessel, and now the more recent time is, is now one week before their IPO.
And so this is really capturing the zeitgeist and all the attention and capital in the short run.
I'm really looking forward to seeing what things, what, how Bitcoin ETF flows change coming up next week and then the week after, after the SpaceX launch.
Yes, and Thomas, as you mentioned, we are seeing this rotation and we'll see how all of this plays out, especially some of those mega cap IPOs that are expected to come down the pike.
But when we're talking about liquidity, we also have to keep in mind that it is actually finite, right?
It's not infinite.
So we're keeping an eye.
On macro pressures, geopolitics, as well as monetary policy.
So given the fact that today is actually jobs day, we digested that headline on our payrolls figure which was better than expected, the unemployment rate remaining unchanged.
How are you wrapping your head around expectations for the global central banks here?
It's a really tough condition right now, you know.
I think crude's up 50% since pre-war conditions, and for the Fed, that kind of leaves them in a very constrained position from a monetary policy perspective, and the jobs report is really just reinforcing the data that we've seen over the last two months where on balance, the jobs market and the labor market has been relatively strong, perhaps not as strong.
You know, a year ago, but it has been very resilient despite all the uncertainty that's happening in the macro area, and that creates a consternation because you have high inflation and a pretty solid labor market.
And so from a Fed perspective when it comes to policy, the question really becomes how do you make a trade-off between the two?
Do you lower interest rates, potentially stoking already high inflation where the labor market is already Feeling pretty strong.
It's a very tough decision and in particular when the Fed has to make a decision now with policy that typically lags 9 to 12 months.
And so my point of view right now is that the Fed is very constrained given the data and given the environment with inflation.
It's really driven by the U.S.Iran conflict.
So a near term resolution there is going to change the likelihood of the trajectory. of monetary policy in the short term, but barring that for investors in this moment, you're really dealing with the Federal Reserve that feels very locked up and very reactive.
So as an investor, you're more likely to have to experience tail risk to meet any kind of remedy from the monetary policy side rather than having the support of an easier monetary policy trajectory to support your risk taking endeavors.
And finally, before I let you go, we have about 60 seconds here or so from tailwinds as well as headwinds.
There's a lot to digest when it comes to what's moving crypto as well as digital assets.
So when it comes to price targets for the crypto major Bitcoin, what are you looking for in 2026 as well as heading into 2027?
So I don't give specific price targets, but I do like to look at things like risk reward and prior scenarios for drawdowns and whatnot, you know, the thing that I'll put into perspective here is that more recently Bitcoin has been testing pretty consistently this 200 week moving average, which is around 61,500 or so.
We saw it test that in February.
We're seeing it tested now.
Each time it's bounced just above it.
So to me it's been a pretty strong support level and then when I look at the ETFs themselves, what's pretty striking is that on 2/3 of trading sessions when Bitcoin is between 6,000,000 and 70,000 bitcoins have seen net inflows.
That's broken trend quite a bit more recently with the sequential net outflows again, I think tied to the SpaceX IPO and this investor interest in AI and semis in particular and that rotation of capital.
But even yesterday we actually saw based on the preliminary data that we've now flipped to net inflows on the day that Bitcoin was below 65,000 and closed below 65,000.
So I do think that there is appetite at this level for a bid.
We saw that back in February, and so the risk reward is certainly more favorable in this environment.
Well Thomas, we will have to leave it there, but we'll continue to monitor that technical level.
Thank you so much for joining us and have a great weekend.
Thank you.
You too.
