Bitcoin (BTC) Slides as ETF Inflows Persist Amid Fed Tax or Ban Threat

BTC Drops Below $67,000 Amid Broader Market Decline

On Monday, October 21, BTC slid by 2.13%, reversing a 0.72% gain from the previous session, closing at $67,308. Significantly, BTC revisited the $69,000 handle for the first time since July before sliding into negative territory. BTC mirrored the broader crypto market, which declined by 2.22%, taking the total market cap to $2.292 trillion.

Fed Proposes Bitcoin Tax or Ban Spooking Investors

The Federal Reserve Bank of Minneapolis published a working paper proposing a Bitcoin tax or an outright Bitcoin ban, aimed at addressing BTC’s influence on policy implementation. Researchers observed,

“A legal prohibition against bitcoin can restore unique implementation of permanent primary deficits, and so can a tax on bitcoin.”

The latest move against bitcoin comes as the US Presidential Election race heats up, with two weeks until Election day.

The working paper drew criticism from the crypto market, with Matthew Sigal, Head of Digital Asset Research at VanEck, remarking,

“Minneapolis Fed Joins ECB With Bitcoin Attack. New Paper Claims Governments Can Run Permanent Deficits if Consumers Don’t Notice & Adopt New Money Like BTC. Fantasizes About “Legal Prohibition” & Extra Taxes on BTC to Ensure Govt Debt Remains “Only Risk Free Security”

Prominent BTC analyst, Tuur Demeester, shared his views on the working paper and proposals, stating,

“This new paper is a true declaration of war: the ECB claims that early bitcoin adopters steal economic value from latecomers. I strongly believe authorities will use this luddite argument to enact harsh taxes or bans. Rather than praising bitcoin as a tech paradigm shift à la petroleum and the internet, the authors introduce the blatantly luddite argument that “early adopters” … “increase their real wealth and consumption” … “at the expense of [latecomers].”

Demeester added,

“In all the years I’ve been monitoring the bitcoin space, this is by far the most aggressive paper to come from authorities. The gloves are off. It’s clear that these central bank economists now see bitcoin as an existential threat, to be attacked with any means possible.”

US BTC-Spot ETF Market Extends Net Inflow Streak to Seven

Despite the Fed’s working paper, the US BTC-spot ETF market extended its net inflow streak to seven consecutive sessions on Monday, October 21. According to Farside Investors:

• iShares Bitcoin Trust (IBIT) had net inflows of $329.0 million. (Previous day: +$70.4 million).
• Fidelity Wise Origin Bitcoin Fund (FBTC) saw net inflows of $5.9 million. (PD: +$18.0 million).
• Bitwise Bitcoin ETF (BITB) reported net outflows of $22.1 million. (PD: +$36.0 million).
• ARK 21Shares Bitcoin ETF (ARKB) saw net inflows of $6.1million (PD: +$109.9 million).

IBIT’s inflows were significant, considering a spike in 10-year US Treasury yields impacting flow tends across the other ten issuers. Notably, investors also brushed aside the Fed Reserve Bank of Minneapolis’s case to tax or ban bitcoin.

Bloomberg Intelligence Senior ETF Analyst Eric Balchunas highlighted IBIT’s success story in the ETF space, saying,

“IBIT had one hell of a week, +$1.1b in new cash, best week since March, passed VTI for 3rd place overall in YTD flows (insane for new launch, esp late in year, the rest of the top 5 is each over 20yrs and old and over $300b. IBIT’s aum is $26b which is in top 2% of all ETFs.”

Outlook: US BTC-Spot Flows, US Election, and the Fed Rate Path

Investors should remain vigilant as the US Presidential Election approaches. Rising chances of a Trump victory could fuel demand for crypto and US BTC-spot ETFs. US BTC-spot ETF market flows will likely continue to influence BTC price trends. Stay updated with our real-time BTC analysis for further insights on managing potential risks.

Technical Analysis

Bitcoin Analysis

Despite Monday’s loss, BTC remains well above the 50-day and 200-day EMAs, sending bullish price signals.

A breakout from the $69,000 resistance level and Monday’s high of $69,402 could signal a move to $70,000. Furthermore, a break above $70,000 may bring the all-time high of $73,808 into play.

Investors should consider sentiment toward the Fed rate path, the US Presidential Election, and US BTC-spot ETF market flow trends.

Conversely, a fall through $66,500 could allow the bears to target $65,000. A drop below $65,000 may signal a drop toward the $64,000 support level.

With a 61.33 14-day RSI reading, BTC could return to $70,000 before entering overbought territory.

Ethereum Analysis

ETH remains above the 50-day EMA while hovering below the 200-day EMA, affirming bullish near-term but bearish price longer-term price signals.

An ETH break above the $2,664 resistance level could signal a move toward the 200-day EMA. Furthermore, a breakout from the 200-day EMA may allow the bull to test resistance at $3,000.

US ETH-spot ETF market-related updates also require consideration.

Conversely, an ETH break below the 50-day EMA could bring the $2,403 support level into play.

The 14-period Daily RSI reading, 56.87, suggests an ETH move above the 200-day EMA before entering oversold territory.