According to foreign media reports, Jim Ferraioli, head of digital currency research at Charles Schwab, believes that Bitcoin's significant underperformance compared to US stocks over the past month is not primarily due to weakening industry fundamentals, but rather because high-risk funds are shifting towards AI stocks, commodities, and anticipated large IPOs.
The past year hasn't been without its positives for the crypto market. The approval of a US spot Bitcoin ETF attracted significant institutional investment, and the regulatory environment in Washington has become clearer. However, despite these developments, Bitcoin hasn't experienced the sustained upward trend the market had anticipated. Ferraioli believes the problem lies in the fact that momentum has shifted away from the crypto market.
Funds Shift to AI and IPOs
Ferraioli stated that crypto assets have historically attracted investment during their "most speculatively attractive" phases. Funds quickly shift once a new, higher-return theme emerges. One of the strongest narratives currently is AI, with related infrastructure, advanced computing, and data center expansion stocks performing strongly recently. Potential IPOs like OpenAI and Anthropic are also attracting speculative capital.
He also mentioned that the private equity market and pre-IPO trading activity are on the rise. Some traders are starting to look for pre-IPO exposure through decentralized platforms. On-chain platforms like Hyperliquid have launched synthetic products pegged to private companies or non-crypto assets, giving speculative funds more avenues to go beyond just Bitcoin and other digital assets.
Continuous outflows from ETFs exacerbate the pressure.
Ferraioli downplayed the direct impact of Strategy's sale of 32 bitcoins on the market. He believes the deal garnered attention primarily because Michael Saylor has long been considered a staunch Bitcoin supporter, but this was not the main driver of the recent market downturn.
He believes that the behavior of those holding positions is more worthy of attention. Some investors who have experienced the significant volatility of the past year may choose to exit the market during the recent rebound, locking in profits or recovering their principal before waiting for a more suitable time to re-enter.
- Bitcoin has fallen by more than 16% in the past month.
- During the same period, the S&P 500 index rose by approximately 5%.
- US spot Bitcoin ETF sees net outflows for 11 consecutive trading days.
ETF data also reflects similar signs. On May 26, a large off-exchange transaction of $1.26 billion occurred in the BlackRock IBIT Spot Bitcoin ETF. NYDIG believes this is more likely a large investor rapidly reducing its Bitcoin exposure than a typical hedge fund arbitrage liquidation. According to reports, US spot Bitcoin ETFs saw a net outflow of $483 million on June 2, marking 11 consecutive trading days of fund withdrawals, with a cumulative outflow exceeding $3.4 billion.
Long-term positive factors failed to generate short-term buying.
Ferraioli believes that regulatory progress, increased institutional participation, and the launch of new products remain long-term factors supporting the crypto industry. However, these factors do not necessarily translate into short-term gains, especially as the market continues to focus on stronger sectors such as AI, semiconductors, defense, and energy.
He also pointed out that the Bitcoin market is currently dominated by retail funds, which explains why its price performance remains weak despite positive factors such as policy support and institutional adoption. If market participants continue to seek higher returns in other assets, Bitcoin may find it difficult to regain the concentrated speculative buying it previously enjoyed in the short term.
