The co-founders of leading analytics firm Glassnode are warning Bitcoin traders that the current macroeconomic backdrop could ignite another sell-off event for BTC.
In Glassnode’s latest newsletter, Jan Happel and Yann Allemann say that Bitcoin’s correlation to risk-on assets remains high, suggesting that a correction in the US stock market will likely drag down BTC as well.
“Our analysis continues to suggest that this renewed sensitivity to market risks and a higher likelihood of stronger drawdowns has not been due to a lack of confidence in [BTC] but rather due to a charged macroeconomic environment.”
According to the Glassnode co-founders, the macroeconomic landscape looks shaky after the Federal Reserve announced the tapering of its balance sheet to the tune of $95 billion per month in an effort to combat persistent inflation. They also mention the looming risk that Russia’s military aggression could expand and target territories of the European Union.
In response to the risky environment, the Glassnode executives say that over $100 million have flowed out of the crypto markets last week with BTC receiving the brunt of the outflows.
“Zooming into the crypto space, last week saw $134 million in fund outflows, marking the second-highest weekly outflows in 2022. Solana received $3.7 million in inflows, and altcoins (multi-asset) recorded $5 million in inflows, while a massive $131 million flowed out of Bitcoin.”
Despite the bleak macroeconomic picture, Allemann says that BTC continues to show signs of on-chain strength. According to Allemann, BTC investors are withdrawing Bitcoin from crypto exchanges at a historic rate, indicating that a bottom could be in sight.
“Bitcoin exchange net position change shows potential bottoming and next leg up. Less supply on exchanges leads to subsiding selling pressure.”
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