Over the past 48 hours, more than $700 billion has been wiped out from the crypto market, causing major high-cap assets to return to critical levels. Whether they will rebound from these levels or continue their decline remains to be seen.
Bitcoin ETF flows may offer a clue. Santiment data shows $2.77 billion in net inflows between the 17th and the 27th of September, marking seven straight positive U.S. trading sessions.
The setup also mirrors August, when nine days of consecutive inflows brought in around $3.04 billion worth of BTC.
However, Santiment warns that demand may now be entering euphoric territory. If these inflows begin to slow, the buying momentum behind BTC could quickly lose steam.
Interestingly, that could very well be the case.
According to SoSoValue, Bitcoin ETFs have seen over $23 million in outflows. While this remains small compared with the $2 billion weekly inflow, it breaks a seven-day streak of positive flows.
If the demand for ETFs cools, it could help explain why crypto is down as the momentum in the broader market loses steam.
The long squeeze adds another layer to the move. More than $400 million in long positions have been liquidated in the last 24 hours.
However, combined with a fall in ETF flows, data suggests that deleveraging alone might not be fueling the sell-offs. Instead, fading FOMO could be adding to the downside pressure too.
In short, what looks like a healthy reset could turn out to be the market unwinding excess euphoria. If the trend persists, crypto could enter October on weaker momentum. Add a tougher macro backdrop to the mix, and the “Why is crypto down?” narrative begins to point to something deeper.
Macro weakness adds to why crypto is down
At first glance, the crypto sell-off looks like part of a much broader market flush.
The last 48 hours have seen heavy selling across U.S. markets. Stocks, bonds, and gold have all fallen, with the U.S.-Iran standoff keeping oil above $100 and traders pricing in higher odds of another Fed rate hike.
Gold and silver are down 4% and 5%, while the U.S. 10-year Treasury yield has climbed to a fresh 19-year high.
Technically speaking, the broad “risk-off” move has wiped out a little over $1.2 trillion from the combined gold and silver market caps.
The Nasdaq 100 is down 1.6%, while the S&P 500 has erased nearly $700 billion in market value as rising yields and elevated oil prices continue to pressure risk assets. In this context, the question of “why is crypto down” may have less to do with crypto itself.
According to AMBCrypto, this is where Bitcoin’s [BTC] ETF momentum matters.
When the big picture is looked at, crypto’s correction looks like part of the wider market flush, with macro volatility pushing capital away from risky assets. This makes the move look like just another healthy reset at first glance.
However, with institutional demand also starting to cool down, the narrative just becomes more pronounced.
If these ETF inflows continue to weaken alongside the wider risk-off move, the prevailing correction might be evidence of a deeper loss of momentum. Rather than just a macro-driven pullback.
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