Market maker Wintermute reported worsening crypto-market conditions during the week amid spot exchange-traded fund outflows and expectations of further US Federal Reserve monetary tightening. The firm said the loss of capital inflows was weakening digital assets and tied a sustained recovery to lower bond yields and renewed net inflows into spot ETFs.

According to Wintermute, US spot bitcoin ETFs recorded net outflows of $679 million, the largest since late June. Investors withdrew another $542 million from Ethereum-based funds.

Bitcoin traded near $86,000 to $87,000 at the start of the week but failed for a third time to break through that range, Wintermute said. The price fell to about $83,000 on Wednesday and reached a local low near $80,400 on Thursday before recovering to $83,500 by Monday.

Wintermute linked the rebound to cheaper oil, a statement by US President Donald Trump that the country would not strike Iran until the midterm elections, and buyers entering the market during the sell-off. Bitcoin moved back above $82,500, a level the firm had previously identified as the upper boundary of its range.

Bitcoin also showed relative resilience against other digital assets, with its market dominance rising to about 59.5%. Of 66 altcoins with market capitalizations above $1 billion, only 11 finished the week higher, while the median decline was 3.7%, according to Wintermute.

Some capital leaving liquid decentralized-finance assets and large cryptocurrencies moved into tokens linked to artificial intelligence, the firm said. Wintermute highlighted NEAR, which continued rising after a brief decline. The firm cited quantum-resistant signature support and a short squeeze as possible explanations but said it could not confirm them.

Conditions for a recovery

Wintermute said the crypto market had lost the support of new capital inflows while US equities continued to rise on expectations of stronger corporate earnings. Forecasts put third-quarter earnings growth for S&P 500 companies at about 29% from a year earlier, according to the firm.

Expectations for Fed policy were adding pressure to digital assets. Minutes from the latest meeting showed that most officials were open to one more interest-rate increase by year-end, while the market assigned about a 20% probability to a move in late October. The 10-year US Treasury yield reached 5.24%.

Wintermute maintained a moderately positive long-term outlook but said further recovery depended on falling bond yields and the return of net inflows into spot ETFs. Until then, the firm views bitcoin as a risk asset sensitive to stock-market moves and does not recommend buying lower-quality altcoins solely because of short-term rebounds.

The market maker said it would shift to a more cautious stance if the 30-year US Treasury yield rose above 5.64%, the high recorded on September 30, or if bitcoin repeatedly failed to remain above $82,500.

Wintermute identified the release of the US September Consumer Price Index as a key event this week because it could show whether energy inflation was spreading into core prices. The firm also highlighted the start of corporate earnings season, including results from the artificial intelligence sector.

Source: Incrypted