Report: Bitcoin investment products losing popularity

Bitcoin is losing popularity among investors, according to a recently published report by digital asset management platform CoinShares.

CoinShares' Digital Asset Fund Flows report tracks the ins and outs of investment in digital assets on a weekly basis. The report said Bitcoin investment products posted a net outflow of $10.9 million last week.

The token's price dropped below $22,000 for the first time since mid-January, posting a weekly loss of five percent. Short-Bitcoin products saw a $3.5 million outflow, with investors taking advantage of its price dip to gain profits or reduce losses on short positions.

Meanwhile, Ethereum — the second largest crypto by market capitalization — recorded a $5.1 million inflow last week, bringing up its year-to-date inflow to $15 million. However, the figure is still lagging behind Bitcoin, which has seen a year-to-date inflow of $183 million from various investment products.

Like Ethereum, altcoin investment products saw increased investment volume in the same period, with a net inflow of $3.9 million.

Cumulatively, the entire crypto market recorded an outflow of $7 million. Analysts said investors were "spooked by the prospect of additional rate hikes by the U.S. Federal Reserve," leading to lower investment in risk assets like crypto.

Analysts said this week the crypto market could see further outflows from digital asset investment products if the macroeconomic headwinds persisted. An uptrend in the U.S. dollar and Treasury bond yields — resulting from the expectation of further rate hikes — could weigh on crypto prices.

The strengthened greenback may push Bitcoin closer to its lower support level of $20,500, the token's 50-day moving average. Bitcoin will likely test its 200-day moving average if it goes lower than that support level, trading around the range of upper $19,000s.

Analysts said there was a chance for Bitcoin to rally from $24,000 to $25,000 if the upcoming U.S. inflation data shows signs of disinflation "in the positive direction." However, if the data does not fulfill investor expectations, the Bitcoin market will be volatile.

Experts say inflation data like the U.S. consumer price index (CPI) is vital in determining the extent of the crypto market's downside, especially since the market is currently under regulatory pressure.

Inflation data coming this week

There are several major inflation data due this week, including the U.S. CPI and retail sales for January.

Economists estimate year-over-year headline inflation to be at 6.2 percent, with annual core inflation being at 5.5 percent. On a monthly basis, the headline inflation rate is expected to be at 0.4 percent in January.

Meanwhile, retail sales in the U.S., excluding automobiles, are expected to see an annual increase of 8.8 percent in January. Analysts said consumer spending had remained resilient in the first weeks of 2023. Mastercard Economics Institute North America chief economist Michelle Meyer said the robust labor market was a "critical support" to the high spending.

Last week, January's job report revealed that the U.S. labor market was still tight, with more than 500,000 additional payrolls in non-farm sectors.

The inflation data will likely determine the Fed's upcoming policy move, which will, in turn, influence the financial market. The market currently predicts that the central bank will have two more rate hikes this year, with a 25-basis-point increase per hike. The additional increases will push the federal funds rate to around 5.15 percent.'

Additionally, economists say that the Fed will likely maintain the benchmark rate at that level for a while until inflation cools down further. Fed chairman Jerome Powell said his agency still targeted a two percent inflation rate.