Citigroup ($C) has dramatically lowered it outlook for leading cryptocurrency Bitcoin ($BTC) as the price continues to erode.
The New York-based bank slashed its 12-month price forecast for both Bitcoin and fellow cryptocurrency Ethereum ($ETH), citing weakening investor sentiment and continued outflows from exchange-traded funds (ETFs) that track the spot prices of BTC and ETH. Analysts at Citigroup also cited a lack of progress on cryptocurrency legislation that has gotten bogged down in Congress as an issue for digital assets.
The note from Citigroup arrives with Bitcoin coming off its worst monthly performance in four years. In June, the largest cryptocurrency by market capitalization declined 19% to trade at $58,400. BTC has now fallen below the key support level of $60,000 amid a dearth of catalysts to propel the price higher.
Citigroup sees the situation worsening in coming months and has lowered its target price for Bitcoin to $82,000 from $112,000. It cut its Ethereum forecast to $2,240 from $3,175. ETH is currently trading at $1,680, having declined 20% in June.
The ETF Conundrum
Bitcoin’s price has been effectively cut in half since hitting an all-time high of $126,223.18 last October. Ethereum was trading near $5,000 last August. Despite some short rallies during the first half of this year, neither cryptocurrency has been able to sustain momentum and has sunk lower in recent months.
A big issue has been outflows from ETFs that track the spot prices of Bitcoin and Ethereum. About a dozen Bitcoin ETFs have seen a combined $3 billion in net outflows this year, with most of that happening in June. Citigroup, and other market observers, say the ETF outflows have been driven by institutional investors pulling capital from the funds.
Citigroup’s worst-case ”bear scenario” forecasts that Bitcoin’s price will fall to $53,000 and Ethereum’s price will decline to $1,094 over the next year. For that to happen, ETF outflows would need to continue and the macroeconomic situation in the U.S. would need to significantly deteriorate.
BTC’s Three-Month Performance
Not enough analysts cover Bitcoin, so we’ll look instead at its three-month performance. As one can see in the chart below, Bitcoin’s price has declined 11% in the past 12 weeks.
