Cryptocurrency Market This Week: Pressure from Capital Outflows and Concerns of Asset Collapse

Retail Investors “Sell Off” - Are Institutions Still Silent?

A new analysis from JPMorgan reveals an interesting phenomenon: the current correction in the cryptocurrency market is mainly driven by retail investors selling off Bitcoin and Ethereum ETFs, rather than industry insiders’ trading activities. Data shows that this month, retail investors withdrew approximately $4 billion from crypto ETFs—an all-time high, surpassing the amount recorded in February.

Notably, during the same period, individual investors continued to pour money into stock ETFs, with about $96 billion flowing in during November and potentially reaching $160 billion if the current pace is maintained. This picture indicates that investors still clearly distinguish between digital assets and traditional securities—weakness in the crypto market does not necessarily reflect a broad pessimism towards high-risk assets.

MSTR Might “Lose Its Gear” from Major Indices

In a development that could have a significant impact, JPMorgan warns that if MSCI removes MicroStrategy (MSTR)—dubbed the “Bitcoin treasury”—from its index, the corresponding capital flow could reach up to $2.8 billion. If other index providers follow suit, the total withdrawal could skyrocket to $11.6 billion.

The deeper reason behind MSTR’s recent price levels is not just Bitcoin volatility, but mainly market concerns about potential exclusion from MSCI as well as other indices like Nasdaq 100 and Russell 1000. MSCI is currently evaluating a proposal to exclude companies whose main business involves holding Bitcoin or other digital assets exceeding 50% of their balance sheets. The final decision is expected to be announced before January 15.

This also reflects a reverse phenomenon: index inclusion for crypto assets once helped facilitate indirect exposure to Bitcoin for institutional and retail investors, but now exclusion mechanisms could “reverse” this process.

The “Bullish” Fed Officials Are Concerned—Further Rate Cuts May Be “Blocked”

Recently, several “dove” Fed officials have spoken out, and the risk of asset price collapse seems to have become a new topic in the monetary policy discussion. Board member Lisa Cook listed several potential dangers to the financial system, including rapid growth in private credit markets, hedge fund activities in the bond market, and the applications of generative AI in automated trading. Cook even implied she wouldn’t be surprised if asset prices at all-time highs suddenly collapsed.

Cleveland Fed President Loretta Mester continues to oppose further rate cuts, arguing that inflation remains too high, and that financial conditions remain loose, providing an additional reason to avoid lowering rates. Board member Michael Barr called for caution, while Chicago Fed President Austan Goolsbee expressed concern about a possible rate cut in December, noting that progress on inflation appears to have “stalled” or even gone off course.

The reality is that the probability of the Fed cutting 25 basis points in December is currently only 39.6%—significantly lower than market expectations earlier.

Cryptocurrency Exchanges Will Get a New “Captain”

The Senate Agriculture Committee on Thursday approved Michael Selig as a candidate for CFTC Chair with a 12-11 party-line vote. This decision is notable as Congress is considering granting the CFTC broader authority over cryptocurrencies.

During the hearing, Selig was questioned by lawmakers about the budget. Currently, the CFTC has only 543 full-time employees, compared to the SEC’s 4,200—an obvious disparity. Selig did not make specific commitments but said he would assess budget needs if appointed. He emphasized the importance of establishing clear rules for the crypto industry—protecting investors while allowing new developers and exchanges to grow healthily.

Argentine President “Taking a Bath”—Crypto Scam $LIBRA Shows Depth

The Argentine Congress Investigation Committee released a 200-page report concluding that President Javier Milei was complicit in the collapse of the $LIBRA token. The report shows Milei promoted $LIBRA on social media, after which eight related wallets withdrew $107 million, harming 114,410 investor wallets.

Even more concerning, the report reveals that Milei’s government also promoted KIP Protocol, which after launching in December 2024, was drained of liquidity. The committee concluded that the government intended to “circumvent” regulatory agencies like CNV. Milei, along with US businessman Hayden Davis and Libra founders, are now under judicial investigation in Argentina and face a class-action lawsuit in New York. Milei has denied the allegations and in May disbanded the special task force investigating the case.

Cryptocurrency Market Movements: Mixed Volatility

Bitcoin is currently fluctuating around $90,720 (down 0.17% in 24 hours), after previously dropping to $86,100. Ethereum recovered slightly to $3,120 (up 0.14% in 24 hours), after earlier falling below $2,800.

US stocks on November 21 ended negatively: Dow Jones down 0.84%, S&P 500 down 1.55%, Nasdaq Composite lost 2.15%. Nvidia (NVDA.O) briefly rose 5% but ultimately fell 3.1%.

Capital outflows from Bitcoin and Ethereum ETFs, combined with weakening US stock markets, are the main drivers pushing the crypto market down. A typical pattern is Bitcoin often declines when US stocks open, then recovers during the Asian session—a clear sign of selling pressure from the US.

Contrasting View: “Whales” Still Quietly Buying

Despite retail investors selling off, large institutions are quietly accumulating. MicroStrategy bought 8,178 Bitcoin with $800 million, while Harvard University increased its position by 200%, adding more BlackRock Bitcoin ETFs. However, the scale of institutional buying still seems insufficient to offset the capital outflows from ETFs.

Market Structure Is Weakening

Data from Glassnode shows Bitcoin has just broken a key support level at $89,000. The market structure now appears fragile: spot demand is low, ETF capital flows are negative, and leverage in trading has decreased. In options markets, traders remain highly risk-averse, with concerns about further downside risks continuing to grow.

RWA 2025: The Promised Land Ahead

Amid market pressures, the RWA (Real World Assets) sector is still expected to shine. By tokenizing traditional assets like gold, stocks, and real estate via blockchain technology, RWA creates a new bridge between Web3 and collateralized finance, opening enormous investment potential in the coming years.