Bitcoin may be at rock bottom, but don’t get your hopes up, according to one investment firm. It may be difficult to rise quickly.
Investors have poured new money into exchange-traded products for Bitcoin and other cryptocurrencies over the past week, indicating a shift in sentiment, according to a Friday report from European asset management firm CoinShares.
However, other factors could hinder the digital asset market’s rise, writes James Butterfill, head of research at CoinShares.
“We have been saying for some time that Bitcoin has likely reached or is approaching its bottom,” the report said. “But we don’t see much upside potential from here.”
The report added that current macroeconomic headwinds, such as the US bombing of Iran and rising oil prices, could cause inflation to rise again.
Bitcoin prices rose earlier this week to hit a seven-day high of $65,501 on news that U.S. inflation was slower than expected. Those gains have since been erased, and the stock is now trading at $64,010.
Bitcoin prices typically perform well on news of falling inflation as investors expect interest rates to fall. But Butterfill said: “A rate cut seems unlikely at this stage.”
Worst price rise in Bitcoin history
According to data from CoinShares, investors have withdrawn a total of $8 billion from funds given crypto exposure, making it the “worst performance in history.”
However, the situation has reversed with $287 million reaching crypto funds last week, and data so far indicates a positive streak is likely to continue this week, CoinShares said.
Bitcoin prices typically perform well as U.S. investors, previously excluded from crypto investing, buy shares in exchange-traded funds (ETFs) approved in 2024.
These products, from BlackRock, Fidelity, Grayscale and others, allow more traditional investors and Wall Street institutions to buy positions in Bitcoin via stock exchange-traded shares.
Since BTC hit an all-time high of $126,080 in October, the cryptocurrency market has faced a blow as investors rapidly liquidated their funds. Bitcoin has struggled to turn a profit, especially after the US and Israel began bombing Iran, leading to a spike in oil prices.
Major cryptocurrencies are currently nearly 50% below that record.
CoinShares added: “While there is increased interest in adding positions in the current setup, the prevailing view is that sentiment remains broadly negative and there is widespread caution.”
