Bitcoin Drops Toward $30,000? Slowing ETF Outflows Fail to Stem Market ‘Extreme Fear’

TradingKey - Bitcoin's rebound remains weak as the market enters extreme fear, with pessimistic forecasts eyeing a drop to $30,000.

On June 5, Bitcoin ( BTC) traded within the $62,000-$64,000 range. While the rebound lacked momentum, it failed to hit new lows, currently trading at $63,280. Notably, bears made three attempts to break below the $60,000 mark but failed, suggesting capital is stepping in at this level to support the price.

Bitcoin price chart, source: CoinMarketCap

It is noteworthy that net outflows from U.S. spot Bitcoin ETFs have slowed significantly, totaling only about $44 million—far below the exodus levels seen over the past two weeks. This suggests a reduced willingness among investors to sell at these levels, leading to a sharp drop in selling pressure. Furthermore, Morgan Stanley ( MS) spot Bitcoin ETF (MSBT) saw inflows of nearly $10 million, indicating some "bottom-fishing" activity by investors.

Spot Bitcoin ETF fund flows, source: Coinglass

Despite signs of a clear slowdown in net outflows from U.S. spot Bitcoin ETFs, overall market sentiment has actually declined to 18, with the Crypto Fear & Greed Index deeply entrenched in the "Extreme Fear" zone. This divergence—"slowing outflows amidst frozen sentiment"—reveals a deeper macro predicament currently facing the cryptocurrency market.

The primary causes of the frozen market sentiment and the persistently high fear index stem from two opposing forces: (1) U.S. inflation has shown remarkable resilience, and labor market data continues to outperform expectations, shattering market hopes for "consecutive and significant rate cuts" by the Federal Reserve. (2) Potential massive selling pressure from the supply side remains a shadow over investors, as the legacy Mt. Gox bankruptcy case prepares to distribute assets. Even if these Bitcoins are not immediately dumped on the spot market, their movement—amplified by social media and on-chain tracking tools—is enough to trigger a collapse in retail investors' psychological defenses.

Extremely bearish views have recently emerged in the crypto market. According to CoinDesk on June 5, Atlas Capital CEO Reza Bundy stated in an interview that "Bitcoin could plunge 70% in the next six months, falling to between $26,000 and $30,000." However, is it possible for Bitcoin to fall to that level?

Bitcoin price chart, source: TradingView

A drop to $30,000 would represent a 76% retracement from last year's peak of $126,000. Based on previous bear market drawdowns, this is within the realm of possibility. However, if Bitcoin were to actually reach $30,000, it would unlikely be a "natural slow decline"; instead, it would likely be triggered by a major event, such as the collapse of a top-tier crypto institution—similar to the downfalls of Mt. Gox or FTX.