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Inflows into 11 new Bitcoin exchange-traded funds that received US regulatory approval in January reversed this week. Investors will be watching the daily data to see if the $850 million leaked from ETFs is just a blip, or a harbinger of a deeper decline for the world's largest cryptocurrency.
The inflows helped push the cryptocurrency's price to a record high of $73,000 this year. But the decline in its price in recent days has hurt investors' enthusiasm for ETFs. At one point this week, Bitcoin fell to a low of $60,760.
“People looked at how low the price of bitcoin was and decided to hold off,” said James Butterville, head of research at cryptocurrency investment group CoinShares. “No one wants to catch the knife falling.”
BlackRock, the world's largest asset manager, posted inflows of $576 million this week, while rival products issued by firms including Fidelity, Invesco and Franklin Templeton took in minimal new money.
These inflows were offset by ongoing investor withdrawals at Grayscale. The asset manager converted its longtime Bitcoin fund into an ETF in January, but the product carries much higher management fees than its competitors.
“We are approaching a dead zone for these ETF products, where the initial madness of pent-up capital has already begun,” said Ilan Solot, chief global markets strategist at Marks.
Bitcoin traders will also have one eye on the so-called halving, a network update scheduled for April that will halve the financial rewards for miners who verify new transactions on the network.
Analysts say this event, which occurs every four years, is expected to push Bitcoin's price higher in the long term. Scott Shipulina
Will progress on the Fed's preferred inflation measure stall?
The US Federal Reserve's preferred measure of inflation is expected to show no progress in lowering price growth in February, highlighting how much work the central bank still has to do to reach its 2 percent target.
On Friday, the Bureau of Economic Analysis will release personal consumption expenditures index data for February. The headline personal consumption expenditures index is expected to rise 2.5 percent year-on-year, according to economists surveyed by Bloomberg, compared to the 2.4 percent rate recorded in January. The core measure, which excludes the volatile food and energy sectors and is the Fed's most closely watched, is expected to reach 2.8 percent, the same as the previous month's rate.
The data follows higher-than-expected consumer price inflation figures for February, which showed headline inflation rose to 3.2 percent last month, compared to 3.1 percent in January.
Better-than-expected inflation numbers in January and February lowered market expectations for the number of times the Fed will cut interest rates this year. In January, traders were betting on cuts of six-quarter percentage points by December. That number is now around three, which is in line with the Fed's expectations.
Federal Reserve officials this week raised their forecast for the level of core personal consumption expenditures by the end of the year to 2.6 percent, from a previous forecast of 2.4 percent. Despite the expected rise in inflation, officials still expect cuts of 0.75 percentage points this year. Kate Duguid
Does gold's rise still have more to go?
The price of gold has risen sharply this month with no clear single catalyst, leaving some analysts scratching their heads.
After big gains earlier this month, the yellow metal traded near the $2,200 per ounce level, briefly rising to $2,222 on Wednesday. Traders are alert for signals that an asset has become overbought and may be due for a correction, or for confirmation that there are strong reasons for its strength or that it may be moving higher.
Analysts have pointed to various factors behind gold's recent strength, including rising expectations of interest rate cuts from the US Federal Reserve, continuing geopolitical tensions in Ukraine and the Middle East, record levels of central bank buying and strong retail demand.
However, some argue that current rates are unsustainable without an actual decline in interest rates, which would make non-yielding assets more attractive. Others point out that although gold has hit record highs in nominal terms, prices remain well below the inflation-adjusted peak of over $3,000.
Ewa Manthey, commodities strategist at ING, said the rally still had “a long way to go.” It highlighted the continued strength of demand for gold as a safe asset amid the conflict in Ukraine and the Middle East and before the US elections.
She added that continued buying from investors chasing gold's rise could “push prices to a new record high.”
Analysts say shifting expectations for interest rate cuts are likely to be the biggest risk to the upside. Future economic data releases, which guide monetary policy expectations, may lead to new volatility. Stephanie Stacy
