Citigroup Blames Bitcoin Crash On ETF Outflows Not Strategy’s BTC Sale

Citigroup analysts have weighed on the potential reasons for Bitcoin’s recent crash. They noted that the market had to do more with the continued spot Bitcoin ETF outflows than Strategy’s BTC sale last week.

Overview of Strategy’s Bitcoin Sale

The comments follow Strategy’s sale of 32 BTC for about $2.5 million, which occurred between May 26 and 31. It marked Strategy’s second Bitcoin sale in its history, per the latest 8-K filing.

The deal prompted speculation in the crypto sector as they moved away from their “never sell” narrative. However, Citi analysts said, investors might be overreacting to the sale.

“An announcement of small digital asset treasury selling has had an outsized effect on BTC in our view but does not alter the fundamental backdrop,” the analysts remarked.

BTC ETF Outflows Remain The Main Concern

Citi says that the flows into and out of spot Bitcoin ETFs are the best proxy for investor demand and a key factor in price action. The bank believes that the ETF is responsible for about 45% of the weekly return fluctuations that Bitcoin experiences. Thus, it is one of the most important indicators of market sentiment, per Citi’s analysis.

New data from the Farside Investors indicates continued selling pressure around BTC ETFs. It has indeed exacerbated the recent crypto market crash, according to analysts.

Spot Bitcoin ETFs saw net outflows totaling around $3.77 billion, between May 15 and June 2 across the United States. During that time the three highest withdrawals were:

• May 27: $733.4 million outflows
• June 2: $519.1 million net withdrawals
• June 1: $483.8 million net outflows

Other massive outflow sessions saw May 18 recording $448.6 million negative flows. Further, on May 26, Bitcoin ETFs saw $333.6 million in redemptions.

Regulatory Updates Are Considered A Crucial Catalyst

Citi analysts noted that positive regulatory updates could help uplift the market sentiment for Bitcoin. At press time, the BTC price traded lower than $67,000.

“We expect sentiment to remain lackluster, especially as the divergence with equity performance remains stark, absent positive news on the regulatory front or ‘de-basement trade’ fears around fiscal positions,” the analysts said.

Along these lines, the CLARITY Act recently entered the Senate’s legislative calendar. Ripple ally SBI Holdings Chairman Yoshitaka Kitao views this as a bullish development amid the market downturn.

The bank is also tracking the progress of the CLARITY Act. Citi says the chances of the bill passing have declined in the current year. However, having said that, analysts still give the law about a 50% chance of passing. They also see it as a potential catalyst to revive investor interest in digital assets.