Stagflation fears trigger mass exodus from digital assets.

Ritu13

Due to renewed concerns over US stagflation, the digital asset market has been in a continuous slump recently, with cryptocurrency investment products experiencing capital outflows for the third consecutive week.

According to the US GDP report, after growing by 3.4% in the previous quarter, the annualized growth rate for the first quarter of this year dropped to 1.6%. Meanwhile, the key inflation gauge, the PCE index, showed that the price annualized rate for the first three months of this year increased from 1.8% in the last quarter of 2023 to 3.4%.

The slowdown in GDP growth coupled with an increase in inflation stickiness has once again raised the possibility of stagflation in the market and further weakened the possibility of a Fed rate cut. In the betting market on the Fed's monetary policy on the prediction platform Polymarket, most traders now believe that the probability of no rate cut this year is 35%, a significant increase from 26% a week ago.

CoinDesk analyst Omkar Godbole stated that the key to sustaining the Bitcoin bull market is the quarterly refunding announcement to be released by the US Treasury Department, which will outline the borrowing needs of the US government for the first quarter and the balance held in the Treasury Department's general account, potentially indicating the direction of the US fiscal policy going forward.

According to a report released by CoinShares Ltd on Monday, investors withdrew $435 million from digital asset products in the week ending April 26. The outflow from the Grayscale Bitcoin Trust reached $440 million, accounting for the majority of the total capital outflows and marking the smallest outflow for the fund's size in recent weeks.

The capital outflows from the US market were the most severe, reaching $388 million. Overall, capital inflows for the year have reached a record $13.6 billion.

The report noted that ETP trading volume dropped from $18 billion in the previous week to $11.8 billion, while the price of Bitcoin fell by 6%. As of the time of writing, Bitcoin has fallen by approximately 1% to $63,620.

Capital outflows were mainly concentrated in Bitcoin and Ethereum, amounting to $423 million and $38 million, respectively. In contrast, altcoins and multi-coin investments saw inflows of $7 million.

Funds also flowed into other "regulars" like Solana, Litecoin, and Chainlink, with inflows of $4 million, $3 million, and $2.8 million, respectively.

Yamini003

Let's see how the plot unfolds next.

Isha000

There's also the possibility of outflows leading to declines.