Bitcoin bounces even as ETF outflows mount

Bitcoin moved back into the $42,000 range Friday after a disappointing week of trading. Meanwhile, stocks slipped even as the latest economic data bolstered expectations that the Federal Reserve can achieve a soft landing after all.

Bitcoin (BTC), which struggled to break out above $40,000 this week, posted a recovery Friday, gaining more than 8% since its Tuesday’s low. Ether (ETH) was also on the recovery path, trading around 2% higher Friday.

Analysts are cautiously optimistic that bitcoin’s ETF-driven selloff could be easing, even as outflows mount. The new spot products end their third week of trading Friday, and outflows are increasing. Spot bitcoin ETF net outflows hit a high of $158 million Thursday.

Newsletter

Subscribe to Blockworks Daily

“This doesn’t necessarily mean that the GBTC outflows are over,” Noelle Acheson, author of the “Crypto is Macro Now” newsletter, said. “Yesterday, they were $394 million, which sounds like a lot but is the lowest outflow since launch day…rather, it reminds us that flows matter but are not the main driver of the BTC price.”

Personal consumer expenditures price (PCE) index data released Friday was in line with analysts’ expectations, showing a 0.2% increase in December and 2.9% high year-over-year. The numbers are a sign that while inflation is still elevated, it is trending lower.

“Spending last month increased 0.7%, comfortably exceeding the 0.5% that was expected,” Criag Erlam, senior market analyst at Oanda, said. “It also came on top of the upward revision to the November reading, which increased to 0.4% from 0.2% previously. All things considered, it’s another sign that the US consumer and economy are in very healthy shape going into the new year.”

Still, traders seemed skeptical. The S&P 500 traded sideways and the Nasdaq Composite lost around 0.4% toward the end of Friday’s session. Both indexes remain modestly higher over the week ahead of the Fed’s Open Markets Committee Tuesday.

Minimal yield moves Thursday and Friday, thanks to the expected economic data releases, are a positive sign for traders, Tom Essaye, founder of Sevens Report Research, said Friday.

“In order for economic data to move yields, it must be so good or so bad it alters the market’s outlook for rate cuts and either pushes it back more (yields higher) or pulls it forward (yields lower),” Essaye said.

“Going forward, the calmer yields are — like yesterday — the more they’ll support these gains in stocks.”

Get the news in your inbox. Explore Blockworks newsletters:

Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
Empire: Start your day with top crypto insights from David Canellis and Katherine Ross.
Forward Guidance: Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin.
0xResearch: Get alpha directly in your inbox — market highlights, charts, degen trade ideas, governance updates, and more.
Lightspeed: All things Solana, in your inbox, every day from Jack Kubinec and Jeff Albus.
The Drop: The newsletter for crypto collectors and traders, covering games, tokens, apps, memes and more.