Bitcoin's BTC$63,767.49 slide below $60,000 may have less to do with Michael Saylor's Strategy (MSTR) and more to do with inflation creeping higher, one analyst argued.

In a Monday report, Markus Thielen, founder of 10x Research, wrote to clients that investors have largely misread the drivers behind crypto's sharp selloff over the past weeks. While much of the market focused on Strategy's first bitcoin sale since 2022 and the potential overhang if the largest corporate holder sells more, the bigger story has been a wave of institutional selling through spot bitcoin exchange-traded funds (ETF), he said.

Since the U.S. inflation report for April came in higher than anticipated on May 12, U.S.-listed bitcoin ETFs have seen roughly $5.4 billion in net redemptions, Thielen noted. During the same period, Strategy accumulated about $2 billion worth of bitcoin, making it one of the few significant buyers in the market.

"The market has misdiagnosed this selloff," Thielen wrote. "Strategy is not the problem."

Thielen said that attention should turn now to Wednesday's consumer price index report for May, which could determine whether bitcoin's recent correction deepens or stabilizes.

10x's model forecasts annual inflation rising to 4.3%, above both the previous month's 3.8% reading and Wall Street's consensus estimate of 4.2%. A reading above 4% could reinforce concerns that the Federal Reserve will need to keep interest rates higher for longer, or potentially even consider additional hikes, the report said.

That would be unwelcome news for risk assets. Markets entered the year expecting multiple rate cuts, but after a string of hotter-than-expected inflation and labor market readings traders are now pricing out easing altogether and increasingly discussing the possibility that the Fed's next move could be a hike rather than a cut.

While bitcoin appears technically oversold after its recent plunge, Thielen cautioned against treating a short-term bounce as the start of a sustained recovery. The firm expects bitcoin could see a relief rally early in the week, but the move will likely to fade if inflation surprises to the upside.

The broader flow picture has also remained weak, 10x Research said. Stablecoins recorded roughly $1.7 billion of net outflows last week and $5.5 billion over the month, suggesting capital leaving the crypto market. Meanwhile bitcoin futures open interest has fallen sharply as traders reduced exposure.

Thielen said ETF flows remain the key metric to watch to gauge bitcoin's next move. "Institutional ETF flows are driving price," he wrote. "Follow the money, not the narrative."

Read more: Bitcoin's slide has no single cause. AI, tech IPOs, quantum, Strategy sale all play a role, NYDIG says