Bitcoin’s ETF Demand Recovery Has Been ErasedAlso Bitcoin Has Never Been This Cheap Relative To The Nasdaq & Markets Are Starting To Price Rate Hikes
Welcome to Ecoinometrics’ Friday edition. Each week, we analyze the three most critical market signals impacting Bitcoin and macro assets, delivering institutional-grade insights through data-driven charts and analysis. Today we’ll cover:
Bitcoin’s weakness is not simple market noise. ETF demand has deteriorated sharply at the same time as investors have been reassessing the path of the monetary policy. That’s the useful framework for evaluating the recent decline. So let’s look at the data. In case you missed it, here are the other topics we covered this week:
Get these professional-grade insights delivered to your inbox: Bitcoin’s ETF Demand Recovery Has Been ErasedThe streak of ETF outflows finally ended. But that doesn’t mean another one won’t start. And by the time it ended, most of the damage had already been done. Look at the chart below which shows cumulative net Bitcoin ETF flows since launch. After nearly 60,000 BTC of outflows over the last two weeks, the recovery in ETF demand that began in March has effectively been erased. Since launch, the defining characteristics of growth phases has been the steady growth in cumulative ETF holdings. That’s why the period from March to end of April looked like a well supported recovery phase. But the recent decline breaks that pattern in a meaningful way and suggests that institutional demand is no longer providing any support. Institutional capital flows are actively working against Bitcoin now. As we discussed on Monday and Wednesday using our ETF flows model, Bitcoin still looks expensive relative to the current level of demand. The gap has narrowed as prices have fallen, but selling pressure remains strong. The macro backdrop is not helping either. Inflation concerns are at the forefront and investors have become far more selective about where they allocate capital. As a result, we continue to see downside pressure on Bitcoin in the near term. Until ETF flows stabilize, it is difficult to build a convincing case that the current correction has fully run its course. For more detail on those projections, see Wednesday’s edition or the Bitcoin Market Monitor report coming this Sunday.
Bitcoin Has Never Been This Cheap Relative To The NasdaqBitcoin’s recent decline is not the usual bear market weakness though. It looks unusual when compared to what the Nasdaq is doing. The chart below compares Bitcoin’s actual price to the price we would expect based on its historical relationship with the Nasdaq 100. While the two assets frequently diverge over the course of a full market cycle, they have tended to move together over the longer term. Historically, Bitcoin has usually outperformed the Nasdaq during strong risk-on periods and underperformed during market downturns. Those swings are normal. What is happening today is not. Bitcoin is now trading almost three standard deviations below its Nasdaq-implied value, the largest downside deviation in the history of this model. That doesn’t automatically mean Bitcoin is cheap. But it does tell us that investors are treating Bitcoin very differently from the parts of the market that continue to attract capital. The Nasdaq remains supported by the fever around AI and technology spending. Meanwhile Bitcoin is facing persistent ETF outflows, tighter financial conditions, and growing concerns about inflation and interest rates. For now, the message from the market is clear: investors are still willing to take risk in a narrow set of assets, but Bitcoin is no longer one of the preferred destinations for that capital.
Markets Are Starting To Price Rate HikesThe deterioration in Bitcoin demand is happening alongside an important shift in the macro backdrop. The change in market expectations over the last year has been remarkable. A year ago investors expected multiple rate cuts from the Federal Reserve in 2026. Earlier this year they expected rates to remain broadly unchanged. Today the market is assigning a meaningful probability to rate hikes over the next twelve months. You can see that shift in the chart below. The black line shows the path of the Fed Funds rate so far, while the red dots show where markets expect rates to be over the coming year. The reason for the change is fairly straightforward. Inflation has been trending higher for more than a year while the labor market remains resilient. That’s cornering the Fed in their options. And now investors are becoming less convinced that the Fed will be able to ease policy for a long time. That matters for Bitcoin because financial conditions are one of the most important drivers of capital flows. Historically, periods of tightening financial conditions have coincided with weaker ETF demand and weaker Bitcoin performance. This doesn’t mean rate hikes are now the most likely outcome. But it does mean investors can no longer rely on the assumption that easier monetary policy is around the corner. Until that expectation changes, the macro backdrop is likely to remain a headwind for Bitcoin rather than a source of support.
Tactical TakeawayAll three charts point to the same conclusion: the forces that normally support Bitcoin are weakening rather than improving:
None of those developments is supportive of a sustained recovery. Because of that, our assessment is that Bitcoin remains under downside pressure. Lower prices alone do not automatically create value. As always, demand remains the key variable to watch. A sustained recovery in ETF flows would force us to reassess this view. Until then, the evidence continues to favour caution. That’s it for today. Thanks for reading. Cheers, Nick P.S. Every week, our team conducts extensive research analyzing market data, tracking emerging trends, and creating professional-grade charts and analysis. Our mission: Deliver actionable macro and Bitcoin insights that help institutional investors and financial advisors make better-informed decisions. Ready for institutional-grade research that puts you ahead of the market? Click below to access our premium insights. You're currently a free subscriber to Ecoinometrics. For the full experience, upgrade your subscription.
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