[Digital Today reporter Jinju Hong] Bitcoin supply and demand had been deteriorating even before Strategy sold, and there have been no clear signs of recovery so far, an analysis showed.

On June 10 local time, blockchain media outlet CoinPost reported that crypto trading and market-making firm Wintermute, in its weekly market report, cited U.S. institutional outflows and net withdrawals from spot ETFs as the main reasons for bitcoin’s recent sharp drop.

Bitcoin fell about 14 percent that week and slipped below $62,000. That was the lowest level since September last year. The market cited Strategy’s bitcoin sale as the direct trigger for the decline, but Wintermute said the real problem lay not in the scale of selling but in already deteriorating sentiment and supply and demand conditions.

Wintermute assessed that Strategy’s sale, at about 32 BTC, had a limited impact on the overall market. It said the fact that the company sold for the first time in about 4 years itself weighed on investor sentiment.

It said weakening demand had appeared much earlier. Citing ETF flows and over-the-counter (OTC) data, Wintermute diagnosed that buying power had been weakening even before reports of the sale emerged. It also analysed that there was a lack of new buyers to support bitcoin as funds moved into equities.

It also saw the centre of selling pressure as U.S. institutional investors rather than Strategy. The report said U.S. money that had pushed bitcoin up from $70,000 to $83,000 about a month earlier was now exiting the market. By contrast, European and Asian investors appeared to be in relatively balanced buying and selling.

Spot ETF flows also supported the market’s weakness. U.S. spot bitcoin ETFs recorded net outflows for 10 consecutive trading days through May 30. That was the longest consecutive outflow streak since the ETFs launched. Cumulative outflows totalled about $2.97 billion, and net outflows in May were about $2.43 billion, the biggest monthly amount this year. A further $91.37 million flowed out on June 8. BlackRock’s IBIT saw $233 million in outflows, and some funds were tallied as moving to products from ARK Investment and Fidelity.

The macroeconomic environment also weighed on risk assets. U.S. nonfarm payrolls rose by 172,000 in May, well above the market forecast of about 80,000. Expectations for early Federal Reserve rate cuts faded, and the U.S. 10-year Treasury yield climbed to 4.55 percent. Over the same period, the Nasdaq index fell 4.7 percent on a weekly basis. Wintermute assessed the current market as a phase in which "good economic data instead acts as bad news for risk assets".

Weakness in AI-related tech stocks was also mentioned. Wintermute suggested overall market liquidity may have declined as poor performance in AI shares coincided with moves to raise funds ahead of a SpaceX initial public offering (IPO).

It also assessed that it was difficult to find clear signs of a rebound for now. Wintermute diagnosed that there were no signs of ETF inflows resuming, and that the macro environment ahead of U.S. midterm elections remained a burden.

Still, long-term investors were observed quietly buying at current levels. Wintermute said, citing OTC desk data, that some long-term funds were stepping in to buy on dips, but it added it was too early to view that as confirmation of a market bottom.

The next variable drawing market attention is the SpaceX IPO scheduled for June 12. Wintermute assessed that the IPO could be an important test of current risk appetite. Strong demand could have a positive impact across risk assets, but a flop could add pressure to risk-asset markets including bitcoin, the analysis said.

Accordingly, the market is watching ETF fund flows, supply and demand from U.S. institutional investors, and whether the SpaceX IPO is a success as key variables.