10xResearch claims that the recent decline in bitcoin’s price is primarily due to increasing inflation, rather than the actions of Strategy. According to Markus Thielen of 10x, the principal factor behind bitcoin’s downturn was institutional selling triggered by the unexpectedly high U.S. inflation data released in April. He suggested that the potential for a price rebound may depend on the consumer price index (CPI) data to be released on Wednesday.
Key points to consider:
- The selloff that pushed bitcoin below $60,000 was largely attributed to institutional sell-offs through spot bitcoin ETFs following the inflation data, as noted by 10x Research’s Markus Thielen.
- Since the CPI report for April on May 12, U.S.-listed bitcoin ETFs have experienced net redemptions totaling $5.4 billion.
- Thielen warned that bitcoin’s recovery could be fleeting if the May CPI inflation data exceeds 4% on Wednesday.
In a report released on Monday, Markus Thielen, founder of 10x Research, informed clients that investors have misinterpreted the reasons behind the significant selloff in the cryptocurrency market over recent weeks. While many focused on Strategy’s first bitcoin sale since 2022 and the potential implications of additional sales by the largest corporate holder, Thielen emphasized that the more significant issue has been a wave of institutional selling via spot bitcoin exchange-traded funds (ETFs).
Thielen pointed out that since the higher-than-expected U.S. inflation report for April was released on May 12, U.S.-listed bitcoin ETFs have faced approximately $5.4 billion in net redemptions. During the same timeframe, Strategy managed to acquire around $2 billion worth of bitcoin, making it one of the few notable buyers in the market.
“The market has misdiagnosed this selloff,” Thielen stated. “Strategy is not the problem.”
He indicated that attention should now shift to the upcoming CPI report for May, which could influence whether bitcoin’s recent downturn worsens or stabilizes.
10x’s model predicts that annual inflation will rise to 4.3%, surpassing both the previous month’s figure of 3.8% and Wall Street’s consensus estimate of 4.2%. An inflation reading above 4% might heighten concerns that the Federal Reserve will need to maintain elevated interest rates for an extended period, or even contemplate further rate hikes, according to the report.
This would likely be unfavorable for risk assets. At the start of the year, markets anticipated several rate cuts, but after a series of stronger-than-expected inflation and labor market reports, traders are now reconsidering easing altogether and are increasingly discussing the possibility that the Fed’s next move could be a rate hike rather than a cut.
While bitcoin seems to be technically oversold following its recent decline, Thielen advised against interpreting any short-term recovery as the beginning of a sustained upward trend. The firm anticipates that bitcoin may experience a relief rally early in the week, but this momentum could dissipate if inflation surprises on the high side.
Furthermore, the overall flow of capital in the market has also remained weak, as reported by 10x Research. Stablecoins recorded approximately $1.7 billion in net outflows last week and $5.5 billion over the month, indicating capital is leaving the cryptocurrency market. Simultaneously, bitcoin futures open interest has significantly declined as traders have reduced their exposure.
Thielen emphasized that ETF flows are a critical indicator to monitor for predicting bitcoin’s next movement. “Institutional ETF flows are driving price,” he stated. “Follow the money, not the narrative.”