• Wintermute believes the recent rise in the crypto market is merely a bounce after a large-scale correction.
• Analysts see no signs of the start of a new bull cycle.
• Institutional capital continues to leave the market through ETFs and other instruments.
• The FOMC meeting was named the main catalyst for the coming days.

Analysts at market maker Wintermute have said that the crypto market has moved into a consolidation phase after a sharp drop, and that a sustainable recovery is only possible if institutional capital returns. 

In their view, the current rally is merely a technical bounce, while the key indicators remain flows into spot bitcoin ETFs, stablecoins and institutional investment products.

Wintermute recalled that two weeks ago the crypto market experienced a large-scale drop — bitcoin lost about 14% in a week, and most participants linked this to selling by large players.

However, in the analysts' opinion, the main causes were a deterioration in macroeconomic sentiment due to fears of a new round of inflation and the end of the previous upward move.

After that, the market received short-term relief thanks to US inflation data that came in line with expectations, as well as a de-escalation of the conflict in the Middle East. 

Institutional capital has not returned

According to the experts, the main problem remains the absence of an inflow of new liquidity. The company noted that all three key sources of capital continue to show weakness:

• spot bitcoin ETFs are recording a prolonged streak of outflows;
• stablecoin issuance is slowing;
• the volume of assets in digital asset treasuries (DAT) has shrunk significantly.

According to Wintermute's estimates, assets under DAT management fell from about $220 billion to $140 billion, while new large institutional inflows have practically ceased.

The analysts recalled that the previous large-scale growth cycle began precisely after the launch of spot ETFs in the US, when new capital started actively flowing into the market. In their view, no such preconditions are currently in place.

Has a bottom formed?

Wintermute believes that the area below $60,000 looks attractive for long-term investors, but it is still too early to talk about the final end of the correction.

The analysts do not rule out a repeated decline in the price of bitcoin to the $50,000 range before the start of a new upward trend. They emphasized that investors should assess capital flows above all, rather than short-term price moves or the news backdrop.

The experts also expect that the nearest driver for the market will be the meeting of the US Federal Reserve.

In the company's view, if the Fed's leadership emphasizes a slowdown in core inflation and a fall in oil prices, this could support risk assets, including cryptocurrencies.

At the same time, hawkish signals regarding the fight against overall inflation could quickly halt the market's current recovery.

Recall that earlier the CEO of cryptocurrency exchange Coinbase, Brian Armstrong, said that bitcoin may have formed a bottom near $60,000.

Source: Incrypted