Key points: Digital asset investment products experienced outflows for the second consecutive week; according to CoinShares' report, the total outflow for the week ending February 21 was $508 million. This indicates that institutional investors are reducing their investments in digital assets. Bitcoin experienced the most substantial outflow, totaling $571 million. Year-to-date inflows have decreased from $7.4 billion two weeks ago to $6.6 billion last week. Capital flows in crypto investment products. Source: CoinShares.
CoinShares research director James Butterfill attributed this to trade tariffs, monetary policy, and inflation uncertainty. He said:
"We believe that investors are remaining cautious after the U.S. presidential inauguration and the ensuing uncertainty regarding trade tariffs, inflation, and monetary policy."
Meanwhile, market participants are awaiting the final U.S. inflation data of the week.
What you need to know: The Personal Consumption Expenditures (PCE) index is the Federal Reserve's 'preferred' inflation metric and will be released on February 28. Last week, initial jobless claims exceeded the median forecast by 4,000, reaching 219,000, indicating that the labor market is weakening. This significantly lowers expectations for multiple rate cuts in 2025. For example, according to the FedWatch tool from the Chicago Mercantile Exchange Group, despite two scheduled Federal Reserve meetings during this period, the likelihood of interest rate cuts is low. The probability of the target rate at the Federal Reserve's FOMC meeting on July 30. Source: CME Group.
The Federal Reserve's probability of keeping interest rates unchanged at the next two meetings is currently: 97.5% for March and 73% for May.
The cryptocurrency market faces significant upward resistance.
The decline in the total market capitalization of all cryptocurrencies today is part of an adjustment that began on January 31, with key support areas turning into resistance. Key points: TOTAL is trading below the critical supply zone between $3.28 trillion and $3.31 trillion, which corresponds to the 50-day and 100-day simple moving averages (SMA). The Relative Strength Index (RSI) is currently at 40, indicating that market conditions still favor downside. Additionally, a sell-off could push the cryptocurrency market down to the support level of $3.03 trillion. Note that this has been a key support area for TOTAL since November 20. A breach of this level would trigger a sell-off, falling towards the 200-day SMA of $2.72 trillion.
TOTAL/USD daily chart. Source: Cointelegraph/TradingView
Conversely, pushing the cryptocurrency market capitalization up may bring it back to $3.2 trillion or higher to test the aforementioned resistance levels.
According to renowned analyst Crypto Zone, "the cryptocurrency market is in a neutral period," with the fear and greed index at 40.
The analyst added: "This indicates that investors are cautiously weighing their actions, and now is a critical moment for strategic decisions."
BTC is bearish down to $70,000
BitMEX co-founder Arthur Hayes stated on social media that many IBIT holders are hedge funds that earn returns higher than short-term U.S. Treasury bonds by going long on ETFs and shorting CME futures. If the BTC price drops and the basis (i.e., the gap between ETF price and futures price) narrows, these funds will sell IBIT and cover CME futures. These funds are currently profitable, and considering the basis is close to U.S. Treasury yields, they will close their positions during U.S. trading hours to realize profits. I am bearish down to $70,000.
Quinn Thompson, founder of the macroeconomic data-focused crypto hedge fund Lekker Capital, posted on social media: "I am trying to convey this message to those who may feel complacent/denial: $95,000 is still not a bad exit price compared to the price I think we can trade in 6-12 months."
Thompson believes there is an 80% chance that Bitcoin will not reach a new high in the next three months and a 51% chance it will not reach a new high in the next 12 months.
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