Author: Stephanie Bedard-Chateauneuf

Recent data from analytics firm Santiment indicates a notable shift in sentiment within the crypto community, signaling a growing bearish inclination.

The sentiment within the crypto community regarding the trajectory of Bitcoin’s price appears to be turning bearish, according to metrics derived from social media activity. This trend, historically observed, often coincides with market bottoms.

As American poet and novelist Charles Bukowski famously remarked, “The masses are always wrong. Wisdom is doing everything the crowd does not do.” This adage holds true in the realm of cryptocurrency, where a burgeoning bearish sentiment towards Bitcoin (BTC) suggests that the current downtrend may be nearing its end.

Santiment, a blockchain analytics platform, noted in a recent market insights report that prices tend to move inversely to the expectations of the majority of traders. According to their analysis, the market could potentially bottom out either just before or shortly after the upcoming halving, anticipated within the next two days.

Santiment’s Social Trends indicator, which monitors discussions across platforms like Telegram, Reddit, and 4Chan, has revealed a decline in mentions related to “bull market” or “bull cycle” since late March. Conversely, there has been a steady increase in references to “bear market” or “bear cycle.”

The decline in mentions of phrases like “buy the dip” indicates a waning sense of optimism, known in crypto circles as “hopium,” among retail investors. Historically, such a decline has often signaled the conclusion of downtrends.

Bitcoin has faced various pressures this month, including diminishing prospects of Federal Reserve interest-rate cuts, escalating geopolitical tensions, and U.S. tax payment deadlines. These factors have contributed to a 14% decline in its price, with the leading cryptocurrency briefly dropping below $60,000 before rebounding to around $61,200 at the time of writing.

With Bitcoin’s blockchain set to undergo its fourth mining reward halving, reducing the per-block BTC emission by 50% to 3.125 BTC, concerns about a further price decline have been raised by some analysts, including those at JPMorgan. However, the prevailing consensus remains bullish over the long term.

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The cryptocurrency market encountered challenges this week, particularly impacting crypto Exchange-Traded Funds (ETFs). The theme of cryptocurrency investment witnessed an overall decline of 5.99%, reflecting setbacks in major cryptocurrencies. Bitcoin retreated by 2.25%, slipping below the $70,000 mark, while Ethereum faced an even steeper decline, plummeting by 6.5%.

Challenges with SEC and Spot ETFs

The recent setback stemmed from actions by the U.S. Securities and Exchange Commission (SEC). The regulatory body initiated a three-week comment period regarding proposals for spot Ether ETFs, effectively postponing any possibility of approval until at least May. This delay subdued investor optimism, especially among those expecting prompt approvals for spot ETFs representing direct investments in cryptocurrencies, as opposed to derivatives.

Impact on Crypto ETF Performance

Particular crypto ETFs bore the brunt of these developments. The Ether Tracker Euro ETC (ETHEREUM XBTE) and the 21Shares Ethereum Staking ETP (AETH) experienced declines of 7.96% and 7.63%, respectively. These setbacks highlight the heightened sensitivity of crypto ETFs to regulatory decisions and market sentiment as investors navigate the uncertain landscape of cryptocurrency regulations and their implications for spot ETFs.

The SEC’s decision to postpone approvals for spot ETFs has cast a shadow over the future of Ether ETFs, temporarily halting the momentum that had been building in anticipation of broader institutional acceptance. While these ETFs offer a regulated avenue for investors to gain exposure to cryptocurrencies, the path forward appears to be mired in regulatory uncertainty, impacting both investor sentiment and ETF performance.

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According to a survey by Deutsche Bank released on Monday, consumers are showing slightly diminished skepticism towards bitcoin, though nearly one-third of respondents still foresee a significant drop in its price by the conclusion of 2024.

Despite substantial investments poured into bitcoin with hopes of capitalizing on price surges, leading regulators have asserted its lack of intrinsic value and associated risks.

Deutsche Bank’s survey encompassed over 3,600 participants, with 52% expressing the belief that cryptocurrencies will emerge as an “important asset class and payment method” in the future. This marks a shift from less than 40% in September 2023.

One-third of respondents in the United States anticipate bitcoin’s value to dip below $20,000 by the end of 2024. Notably, this demographic is marginally diminishing, having comprised 35% in February and 36% in January.

The segment of individuals regarding cryptocurrencies as a “temporary trend destined to fade away” dwindled to less than 1%.

However, merely 10% of those surveyed expect bitcoin to surpass $75,000 by year-end.

Context

Bitcoin ascended to a three-week peak on Monday, having achieved an all-time high of $73,803.25 in March after rebounding from a significant downturn in 2022.

Analysts attribute the recent resurgence to anticipation surrounding spot bitcoin ETFs and expectations of impending interest rate reductions.

What’s Ahead

Some analysts interpret bitcoin’s recent rebound beyond $70,000 as a sign of investors disregarding cautionary advice.

Deutsche Bank analysts anticipate support for bitcoin’s price from forthcoming events such as the “bitcoin halving,” regulatory measures, central bank rate cuts, and the potential approval of spot ethereum ETFs by the SEC.

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Global crypto investment products have witnessed an unprecedented surge in annual inflows, reaching $13.8 billion year-to-date, with an additional $646 million added last week. However, there are indications that the hype surrounding exchange-traded funds (ETFs) is beginning to moderate, according to James Butterfill, Head of Research at CoinShares.

Leading asset managers such as BlackRock, Bitwise, Fidelity, Grayscale, ProShares, and 21Shares collectively attracted $646 million in inflows globally last week, as reported by CoinShares. This follows the previous week’s net inflows of $862 million, pushing the year-to-date inflows to a historic high of $13.8 billion, surpassing the prior annual record of $10.6 billion set in 2021, within just a few months into 2024.

This surge indicates a sustained recovery for global crypto funds, following nearly $1 billion worth of outflows observed for the week ending March 22. However, Butterfill noted a moderation in appetite from ETF investors, with weekly flow levels not reaching the heights seen in early March. Additionally, trading volumes declined to $17.4 billion last week compared to $43 billion in the first week of March.

Bitcoin Continues to Dominate

Bitcoin remains the primary focus for global crypto investment products, with a net addition of $663 million last week. Conversely, short-bitcoin funds experienced their third consecutive week of outflows, totaling $9.5 million, indicating minor capitulation among bearish investors.

ETFs remain dominant, accounting for $484.5 million of last week’s net inflows.

Bitcoin is currently trading up 4% over the past week at $72,129, while the GMCI 30 index, representing the top 30 cryptocurrencies by market capitalization, has seen an 8% increase during the same period, reaching 154.27.

Inflows into Other Cryptocurrencies

Investment products tied to Litecoin, Solana, and Filecoin also attracted inflows of $4.4 million, $4 million, and $1.4 million, respectively, last week. However, funds based on Ether experienced outflows for the fourth consecutive week, losing $22.5 million.

Regional Sentiment

Regionally, sentiment remains polarized, with U.S.-based funds adding $648 million last week, alongside inflows for products in Brazil, Hong Kong, and Germany. However, Switzerland and Canada recorded outflows of $27 million and $7.3 million, respectively.

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Brad Garlinghouse, CEO of Ripple, has made a bold prediction regarding the cryptocurrency market, anticipating its total value to double within the current year. He attributes this forecast to significant developments, including the launch of the first U.S. spot bitcoin exchange-traded fund (ETF) and the forthcoming bitcoin “halving.”

Garlinghouse expressed his optimism during an interview with CNBC, stating, “The overall market cap of the crypto industry … is easily predicted to double by the end of this year … [as it’s] impacted by all of these macro factors.” He emphasized the potential positive regulatory momentum in the United States as another factor propelling the market to new heights.

The Ripple CEO’s outlook aligns with expectations of the combined market capitalization of the cryptocurrency market surpassing $5 trillion in the current year. He attributes this projected growth to macro factors such as the debut of the first U.S. spot bitcoin ETF and the upcoming bitcoin halving.

The approval of the first U.S. spot bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) on January 10 represents a significant milestone. These ETFs enable institutions and retail investors to access bitcoin exposure through trading on U.S. stock exchanges without directly owning the underlying asset.

The bitcoin halving, occurring approximately every four years, halves the total mining reward to bitcoin miners. This event, scheduled for later this month, is anticipated to further influence market dynamics.

Garlinghouse highlighted the contraction of supply and expansion of demand as fundamental drivers of market growth. He remarked, “That doesn’t take an economics major to tell you what happens when supply contracts and demand expands.”

As of April 4, the total crypto market capitalization stood at approximately $2.6 trillion. A projected doubling of this figure would imply a new total market cap exceeding $5.2 trillion.

Bitcoin, the leading digital currency, has experienced significant growth, appreciating over 140% in the past year. Despite reaching a record high above $73,000 on March 13, its value has since retraced below the $70,000 level.

Garlinghouse also highlighted the potential for positive regulatory developments in the United States, suggesting a shift towards greater clarity and accommodation for the crypto industry. He acknowledged the SEC’s recent enforcement actions, including the lawsuit against Ripple alleging illegal XRP sales, but expressed optimism for regulatory clarity moving forward.

Garlinghouse’s bullish outlook is shared by others in the crypto space, including Marshall Beard, COO of U.S. crypto exchange Gemini, who anticipates bitcoin’s price reaching $150,000 later this year. Despite anticipated volatility, driven by factors such as new regulations and supply dynamics, the overall momentum suggests continued growth for the crypto market.

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