BofA Sees Signs of 'Fading Sell Pressure' in Crypto Markets

BofA cryptocurrency analyst Alkesh Shah told investors in a note Friday that they see signs of fading sell pressure in cryptocurrency markets.

The analyst explained that "over the last 2 weeks, digital assets’ market value fell 1% vs 29% over the prior 2 weeks, stablecoin exchange inflows were large vs outflows over the prior 2 weeks and DeFi TVL fell 7% vs 27% over the prior 2 weeks."

Although idiosyncratic risks may be decreasing, macro risks remain, said Shah, stating it is in part due to the digital asset ecosystem being an emerging high-growth speculative asset class with tokens that are exposed to similar risks as high-growth stocks.

"Upside is likely capped until risks associated with rising rates, inflation and recession are fully discounted. Despite volatile token prices, crypto winter concerns haven't reduced institutional interest.," Shah added. "Continuous BTC exchange net outflows for 19 of the 25 weeks this year and tight supply with 65% of tokens in circulation last moved over 1 year ago indicate investors are increasingly HODLing, but decreased miner profitability has driven sell pressure (neutral).

Shah said investor sentiment remains negative, although that is partially attributable to challenges for Celsius and Three Arrows Capital.

"Top 4 stablecoins saw exchange net inflows over the last 2 weeks that were 5.1x larger than net outflows over the prior 2 weeks, indicating that investors may be beginning to move off the sidelines (bullish)."

By Sam Boughedda

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