As Bitcoin’s (BTC) price marches toward the $30,000 mark, analysts are scratching their heads over a capital flight in the virtual asset industry.
A recent report from CoinShares revealed that the digital asset outflows in the last six weeks have been rising, settling at $424 million. During the last week, net outflows nearly exceeded the $100 million mark as the trend shows little to no signs of slowing down.
CoinShares’ analysts attempted to rationalize the trend by attributing it to a thirst for liquidity amongst investors. The tragic incidences of bank collapses in the U.S. may have played a role in the liquidity crises faced by virtual currency traders in the ecosystem.
“It is evident this sentiment is contrarian relative to the rest of the crypto market. It may be driven, in part, by the need for liquidity during this banking crisis, a similar situation was seen when the COVID-19 panic first hit in March 2020.” read CoinShares’ report.
The outflows rolled into the week when Bitcoin’s price went on a staggering rally of over 30% in the last seven days to reach highs of over $28,000. Prior to the rally triggered by a U.S. banking crisis, BTC traded in the doldrums of around $17,000, the recent rally the highest peak for the asset in over five months.
Despite the spike in outflows, Ethereum (ETH) recorded impressive inflows to buck the trend. CoinShares recorded inflows of over $1.3 million during the past week, which confirms the theory that low liquidity triggered BTC outflows.
CoinShares noted that regionally, the U.S. was responsible for the bulk of the six-week outflows, with Europe and Asia contributing their fair share of the trend.
“Assets under Management (AuM) has fallen by 10% over the week, retracing back to levels seen at the beginning of 2023,” said the report. “The outflows have also wiped out all the inflows seen this year.”
The recent outflows have cast a shadow of doubt on the potential of the largest virtual currency to surpass $30,000 days after breaking a key resistance point. Onchain analysts believe that if the $30,000 range is broken, it could lay the foundations for a strong bull run.
However, there are fears that retail investors might construe the rally as an opportunity to take some profit off the table after a lengthy bear market. Others have pointed out that the steady outflows could mean that investors are not ready to offload their holdings, urging traders to keep a close watch on the metric.