Bitcoin’s “digital gold” narrative takes a further hit amid Mideast conflict

Investors appear to be rotating where they are placing their crypto bets, but not necessarily fleeing the asset class entirely. 

Last month, spot bitcoin ETFs registered $206.5 million in outflows, marking their fourth straight month of redemptions. Ethereum spot ETFs saw even heavier withdrawal as $369.9 million left the investment vehicles, also marking a fourth consecutive monthly outflow. 

Since November, spot bitcoin and ethereum ETFs have posted more than $9.1 billion in cumulative outflows.

Bitcoin and ethereum are the market’s virtual ATMs, according to Chris Soriano, cofounder and chief commercial officer at BridgePort. “It’s no surprise when institutions start laying off risk or meet redemptions, they naturally sell what’s most liquid first,” Soriano told Sherwood News. “This is no different than when a traditional fund manager trims S&P 500 exposure before touching their small-cap growth positions.” 

On the other hand, newer funds based on altcoins haven’t stopped recording monthly green candles. 

Spot XRP ETFs pulled in $58 million last month and have yet to post a single negative month since their launch in November. Spot solana ETFs attracted $63 million and, likewise, remain in the black since their debut in October. 

The outflows of the two largest cryptocurrencies combined with the modest inflows of the two smaller tokens suggest a rotation regime, Soriano argued. “Institutions trimming their core liquid holdings while selectively adding to high-conviction, higher-beta positions where they think there’s more juice in the squeeze. It’s not a contradiction; it’s portfolio mechanics behaving exactly as you’d expect,” Soriano continued.

He added that XRP and solana’s markets are also thinner, which means the same dollar of buying pressure registers as a louder, more persistent inflow signal than it ever would in BTC or ETH.

Nic Roberts-Huntley, CEO and cofounder of Blueprint Finance, told Sherwood that bitcoin and etheruem’s outflows combined with XRP and solana’s inflows “may signal a broader market transition, one where capital increasingly chases specific use cases rather than the entire asset class moving in lockstep.”

After rallying from $1,830 to above $2,100 on Wednesday, ethereum struggled to hold on to its gains and dipped under $2,000, a round psychological price level, on Thursday. 

The seesaw price action helped liquidate $146 million worth of leveraged long and short positions on ethereum in the last 24 hours, data from CoinGlass shows.  

While ethereum was due for a relief rally after entering into oversold conditions as measured by its relative strength index, some are still maintaining a bearish sentiment, according to Delphi Digital analyst Simon Shockey.

With ethereum now trading under $2,000, Shockey called the rally “unconvincing.” He told Sherwood News that he doesn’t “think most crypto natives are compelled to really believe the lows are in,” adding that he could see ethereum fall further from here and make new lows in the second half of the year. 

The price action comes as cofounder Vitalik Buterin has sold $35 million worth of ethereum tokens since the start of February and the paper loss for the largest ethereum treasury firm, BitMine Immersion Technologies, has climbed to nearly $7.9 billion. 

On the positive side, ethereum developers introduced a new road map that involves seven hard fork upgrades by 2029 and several north stars, one of which aims to make ethereum a “post quantum” layer 1 network.