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Wall Street bank Citi ( C ) said the latest bout of crypto market weakness comes despite a buoyant equity performance, with strong October liquidations leaving a dent in investor confidence.
The Oct. 10 selloff reduced risk-taking not only among leveraged crypto traders, but also among newer spot exchange-traded fund (ETF) investors, who have since pulled, analysts Alex Saunders and Nathaniel Rupert wrote in a Tuesday report.
Flows in US spot bitcoin ETFs have slowed sharply in recent weeks, undermining what analysts call a critical pillar of support for their positive outlook.
The bank’s forecasts assume steady ETF flow as financial advisers and other investors gradually add bitcoin exposure. With that momentum settling in, the report warned that sentiment could remain soft.
Onchain data adds to the cautious tone. Analysts noted that large holders of bitcoin have decreased in number while smaller retail portfolios continue to grow, a sign that some long-term investors may be selling. The decrease in funding rates also suggests a decrease in the demand for leverage.
From a technical point of view, the outlook is not better. Bitcoin fell below its 200-day moving average (SMA), a level Citi says could further weigh on demand given the market’s confidence on such indicators. The bank also linked bitcoin’s weakness to tightening bank liquidity, as reserves were depleted and short-term rates remained high.
While the industry is still early in its broader adoption cycle, the report concluded that ETF spot flows remain the key signal to watch for any turn in crypto sentiment.
Read more: Citi says Crypto’s correlation with stocks is tightening as volatility returns
