Cryptocurrency Market Faces Uncertainty as Inflows Slow Down

The cryptocurrency market is facing uncertainty as inflows slow down, with JPMorgan Chase analyst Nikolaos Panigirtzoglou expressing doubts that crypto inflows will continue at the same pace for the remainder of 2024. This year has seen crypto net inflows of $12 billion thus far, a figure that could jump to $26 billion by year’s end assuming flows continue apace, driven by demand for spot bitcoin exchange-traded funds (ETFs).

JPMorgan Chase analyst Nikolaos Panigirtzoglou

However, Panigirtzoglou wrote that it might not be entirely made up of new funds coming into the crypto space. Instead, he attributed the majority of the $16 billion inflows into spot bitcoin ETFs since launch to a rotation from existing digital wallets on exchanges. This movement is noticeable, he noted, as bitcoin reserves on exchanges have dropped by 220,000 BTC, or $13 billion, since the Securities and Exchange Commission (SEC) approved bitcoin ETFs in January.

The analyst attributed the rotation to the cost-effectiveness, deeper liquidity, regulatory protection, and convenience of the ETF wrapper that has become market participants’ preferred choice of instrument for bitcoin exposure for both existing and new crypto investors.

Meanwhile, U.S.-listed bitcoin ETFs experienced outflows totaling over $226 million on Thursday, marking the third day of outflows this week. This trend echoes the stream of outflows that took place at the end of April. Fidelity’s FBTC recorded the highest outflow, with $106 million withdrawn, preliminary data from SoSoValue shows.

In other news, the Electric Reliability Council of Texas (ERCOT) CEO said in Senate testimony that the state’s grid capacity will need to double in the next decade to handle demand, citing demand from AI and bitcoin mining. The political climate towards these two industries is souring because of increased energy demands.

ERCOT CEO Pablo Vegas

The crypto industry is still in its early stages, and there is a lot of room for growth and innovation. However, the increasing energy demands from AI and bitcoin mining are sparking concerns about the environmental impact and the strain on the power grid.

In conclusion, the cryptocurrency market is facing uncertainty as inflows slow down, and the increasing energy demands from AI and bitcoin mining are sparking concerns about the environmental impact and the strain on the power grid.

Bitcoin ETFs See $226M Outflows Led by Fidelity’s FBTC