- Banking and financial services provider Citi attributed the price stagnation in the crypto market to the slowing demand for ETFs.
Citi, one of the leading providers of banking services, has recently thrown its hat into the discussion about the ongoing sell pressure in the cryptocurrency market. The financial institution identified the root cause of the event that led to liquidations of over $2 billion leveraged positions around Wednesday midnight to the slowing demand in related exchange-traded funds (ETFs).
Eroding Investor Sentiment in the Crypto Market
According to Citi, the largest 24-hour liquidation amid the intensifying US-China trade tension on October 10 has significantly eroded investor sentiment. The flash crash triggered by over $19 billion in liquidations served as a stark reminder of the high risks involved in leveraged trades.
The bank claimed that the event considerably reduced the risk appetite of leverage traders. Additionally, it dissuaded new spot ETF investors from entering the currently shaky market.
To date, the Crypto Fear & Greed Index is set at 23 on a scale of 0 to 100, indicating investors are overly cautious in the market. This signals a generally bearish mood in the crypto community. On the other hand, it could also be an opportunity for people with high risk tolerance to enter the market after Bitcoin and other major altcoins have entered substantial corrections from their all-time highs in the past few months.
Crypto ETF Inflows
Bitcoin (BTC) and Ethereum (ETH) ETFs—the largest crypto ETFs in the US—continued to see outflows exceed inflows over the past five trading days. These resulted in negative net inflows of $1.9 billion for spot Bitcoin ETFs and $718.9 million for spot Ethereum ETFs from October 29 to November 4.
Analysts projected that Bitcoin’s breach of its 200-day moving average and tightening bank liquidity could further suppress demand for crypto assets, including related ETFs, in the short run. Unfavorable macro events, such as regulatory setbacks and economic tensions, could amplify the impact. The latter, however, could be offset by Bitcoin’s “digital gold” narrative gaining traction in discussions.
Citi Urges Union of TradFi and DeFi
Citi Global Head of Digital Assets Ryan Rugg was one of the speakers at the Ripple Swell event this week in New York. The official notably called out the mainstream media for constantly pitting traditional finance (TradFi) against decentralized finance (DeFi).
Rugg said that such rivalry no longer exists as many financial institutions are now embracing digital assets and blockchain solutions to streamline, secure, and drive efficiency in their operations, especially in payments and other transactions. She pointed out that both sectors are already coming together to bring crypto and its underlying tech to real enterprise adoption.
Interestingly, Rugg praised Ripple for being at the center of the convergence of TradFi and DeFi in the ongoing evolution of global finance.
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