Swissblock warns Bitcoin enters dangerous territory amid institutional ETF withdrawals
May witnessed overwhelming institutional Bitcoin sales as exchange-traded fund withdrawals reached multi-week peaks while escalating tensions with Iran destabilized cryptocurrency markets.
The world's leading cryptocurrency is entering a precarious high-risk phase driven by persistent institutional liquidation, particularly through US spot exchange-traded funds, crypto analytics firm Swissblock reports.
In a Tuesday statement, Swissblock revealed its Bitcoin risk index had climbed to a concerning risk level of 33 out of 100, noting that "every time the Risk Index signals that selling pressure is structurally overwhelming the market, what sits underneath is institutional distribution."
The company's exclusive risk index was created to evaluate the comprehensive risk environment within the Bitcoin marketplace through analyzing the comparative equilibrium between sell-side and buy-side pressure, offering insights into the current risk level associated with purchasing or maintaining Bitcoin positions.
Following robust buying activity throughout March and April, the market has reversed course into a distribution phase during May, with the risk index "moving into high-risk territory while ETF flows are deteriorating simultaneously," Swissblock stated.
The analytics firm noted that demand from spot Bitcoin ETFs is failing to effectively counteract the selling pressure, and in the absence of substantial ETF backing, "the risk index can continue accelerating higher."
Blockchain data analytics firm Glassnode disclosed on Monday that US Bitcoin ETFs have experienced net capital withdrawals on almost all trading sessions starting from May 7, demonstrating "a persistent institutional sell signal now running for more than two weeks."
"This steady drip of outflow continues to add to the supply side without a visible demand offset," it said.
In a Tuesday conversation with Cointelegraph, Jeff Ko, chief analyst at CoinEx, explained that the wider cryptocurrency market "remains in a holding pattern."
"Spot ETF flows have posted more than $2 billion in outflows over the past two weeks, highlighting that institutional risk appetite is still sensitive at the margin," he added.
Bitcoin dips as US strikes Iran
Market risk intensified further on Tuesday morning following numerous reports indicating the US had conducted additional strikes against Iran notwithstanding recent diplomatic advancement between the nations toward a potential peace agreement.
US Central Command said the strikes targeting Iranian missile sites and boats attempting to place mines were in "self-defense" and were to protect US troops from threats posed by Iranian forces.
The leading cryptocurrency responded with a 1% downturn, dropping from above $77,000 to slightly under $76,500 on Coinbase, based on TradingView data, though it has stayed within a relatively narrow trading range for nearly four months.
Ko said that "despite Washington's latest 'self-defence' operation, the very short-term market reaction may still lean risk-on, particularly as investors appear to be looking through the geopolitical noise and focusing on the possibility of a US-Iran peace deal."