Citigroup: Bitcoin Crash Tied to ETF Outflows, Not Strategy's BTC Sale

Citigroup analysts have weighed in on the potential reasons for Bitcoin's recent crash. They noted that the drop had less to do with Strategy's BTC sale last week and more with the continued spot Bitcoin ETF outflows.

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 the company moved away from its long-touted "never sell" narrative — though at 32 BTC, calling it a fire sale is generous. Citi analysts said investors might be overreacting to the move. "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.

Citi says that 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 ETFs are responsible for about 45% of the weekly return fluctuations that Bitcoin experiences, making them one of the most important indicators of market sentiment per its analysis. Fresh data from Farside Investors points to continued selling pressure around BTC ETFs, which has only made the recent crypto market crash worse, according to the analysts.

Spot Bitcoin ETF outflow data. Source: Farside Investors. Spot Bitcoin ETFs saw net outflows totaling around $3.77 billion between May 15 and June 2 across the United States. The three highest withdrawal days during that stretch were: May 27 with $733.4 million in outflows, June 2 with $519.1 million in net withdrawals, and June 1 with $483.8 million in net outflows. Other heavy sessions included May 18, which recorded $448.6 million in negative flows, and May 26, when Bitcoin ETFs saw $333.6 million in redemptions.

Citi analysts noted that positive regulatory updates could help lift market sentiment for Bitcoin. At press time, the BTC price traded below $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 those lines, the CLARITY Act recently entered the Senate's leg