Crypto Slump: Yet Bitcoin Continues to Generate Profits

Key Points

• Crypto capital inflows have dropped by over 70% in two weeks, reflecting investor caution amid market volatility.
• Despite fear gripping the crypto market, Bitcoin ETF inflows remain strong, indicating institutional conviction.

Capital inflows into the cryptocurrency market have seen a sharp decrease, falling from $8.2 billion on April 4th to a mere $2.38 billion by April 18th. This significant drop demonstrates a growing caution among investors due to increasing market volatility and macroeconomic pressures.

This sudden deceleration signifies a change in risk appetite, with both retail and institutional investors reducing their exposure to volatile assets. Despite the market’s earlier bullish momentum, current conditions suggest that investors are reassessing their positions in response to the wider economic environment.

Why Fear is Gripping the Crypto Market

Sentiment data supports this shift in behavior. The Fear and Greed Index, a measure of market sentiment, has remained steady at 33, indicating a state of fear. This level has been consistent for weeks, suggesting a psychological impasse with buyers hesitant to make aggressive moves.

Historically, extended periods of fear have preceded both sharp rebounds and deeper corrections. However, the current lack of sentiment volatility suggests hesitancy rather than panic, indicating that investors are waiting for stronger macroeconomic or price signals before making decisive moves.

Inflation Fears and Crypto Confidence

Adding to the pressure, macroeconomic concerns have intensified. Recent data shows that 1-year inflation expectations surged 1.7 percentage points in April, reaching 6.7%—the highest level since 1981. This marks the fourth consecutive monthly increase, with inflation expectations rising a total of 4.1 percentage points since November 2024.

In addition, 5-year inflation expectations currently sit at 4.4%, the highest since June 1991. Simultaneously, consumer sentiment has fallen to its second-lowest level on record. These figures suggest stagflation, a condition of slow economic growth and high unemployment accompanied by rising prices, which has led to increased fear in the crypto market, generally seen as a high-risk asset class.

Despite the overall gloom, there is a glimmer of hope. Bitcoin (BTC) ETFs recorded a $107 million net inflow on April 17th, bringing the monthly total to $156 million. Over the past three months, net ETF inflows crossed $1 billion, indicating that institutions have not entirely retreated from the crypto market.

While Ethereum ETFs remained stable, this disparity underscores Bitcoin’s perceived strength as a safer bet. Furthermore, continued ETF inflows could provide the market with a degree of stability and prevent panic-driven capitulation in the short term.

The sharp decrease in capital inflows and persistent fear signals a growing caution in the market. However, steady institutional inflows through ETFs suggest investors are not completely abandoning the crypto market. Instead, this appears to be a short-term reset driven by macro fears rather than a structural breakdown. If inflation expectations stabilize and sentiment improves, crypto markets could find footing for a renewed rally.