Bitcoin hits four-month low

The cryptocurrency was last down 3.4% to $63,478.0

Bitcoin tumbled to a four-month low on Thursday, extending recent losses sparked by heavy exchange-traded fund outflows and a sale by top corporate holder Strategy. Investors have also been pivoting away from cryptocurrencies and into more topical sectors, such as artificial intelligence-linked stocks.

The cryptocurrency was last down 3.4% to $63,478.0 at 21:30 GMT, its lowest level since early February. Its recent losses have seen it fall back to levels around 50% below its October record high.

Bitcoin’s deep losses came amid sustained capital outflows from spot ETFs. Data from SoSoValue showed outflows of around $396 million from Bitcoin ETFs on Wednesday, adding to a nearly $1.02 billion outflow seen at the beginning of the week.

This week’s outflows came after institutional investors pulled out a combined $3.7 billion from Bitcoin ETFs over the last three week, driven by increased risk aversion in the face of macroeconomic disruptions coming from the Iran-U.S. war.

Strategy also sent bearish signals to the market this week after it marked its first Bitcoin sale since late 2022. While the amount of Bitcoin sold was small, the move raised renewed questions over the long-term viability of Strategy’s treasury model, especially given that it is contingent on Bitcoin prices continuing to rise steadily.

Strategy’s move once again highlighted a long-known issue in the Bitcoin market. When BTC simply sits passively on corporate balance sheets, it does not generate cash flow, yield, or liquidity on its own. That means companies holding large Bitcoin reserves have to eventually sell parts of it to fund their obligations, analysts at Yield Basis said.

This becomes particularly clear during periods of deleveraging. If BTC functions purely as a reserve asset, spot sales remain the primary liquidity mechanism whenever companies come under pressure. And when market conditions are tight, even relatively small treasury sales can have a long-reaching effect, as investors start pricing in the possibility of additional forced selling across the market, the analysts said.

ETF outflows were also driven by investors pivoting into AI stocks from non-yielding crypto assets, given that the former offer fundamentals and exposure to a fast-growing technology.