Bitcoin Capital Flows Are Weakening: Is The Air Coming Out Of The Bubble?

While the price of Bitcoin remains near all-time highs, there is evidence of waning enthusiasm for this poster child of the current speculative market environment.

The chart above illustrates that the pace of capital flows into publicly traded Bitcoin funds has steadily declined from the peak of late 2020 despite an increase in the number of available funds and a rising Bitcoin price.

This decline in Bitcoin capital flows, along with the recent underperformance of the Nasdaq versus the S&P 500 and a decline in call option buying, suggests that the current speculative fervour may be beginning to weaken.

A sobering of investor behaviour may make markets vulnerable to a significant pullback, given the current lofty heights of both investor optimism and valuation at which they now sit.

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