A while ago on Twitter I said this: Bitcoin BTC
+3.66%
ETF flows are a key driving force shaping the current market trajectory.
However, after further thought and reflection with some of my favorite market commentators, I think we need to adjust these claims.
ETF flows actually matter. As investors flock to funds that track the prices of major cryptocurrencies, we have observed prices steadily rising. Conversely, when these inflows turned into outflows, we saw token prices fall sharply. In particular, interest in spot ETFs declined on March 18, resulting in over $150 million in outflows. This trend continued over the next two days, with outflows exceeding $500 million. As a result, from March 17 to March 19, Bitcoin’s value fell by more than 9%. Crypto Twitter looked bearish and salty as it passed the penny mark.
Bitcoin price rose significantly despite an outflow of $260 million yesterday (March 20). Bitcoin price surged as much as 11% during Wednesday’s trading session. The rise can largely be attributed to the Federal Reserve’s announcement, which hints at the possibility of three rate cuts this year. This news not only boosted Bitcoin, but also U.S. stocks. Looser monetary policy is clearly beneficial to risk assets like cryptocurrencies, but they now appear to play a more important role in the narrative surrounding cryptocurrencies than ETF flows.
Overestimating the Impact of Bitcoin ETF Flows
Essentially, negative flows and unfavorable macroeconomic news depress price performance. However, positive macroeconomic news may offset the negative trend, at least for the time being.
So just watch the flow. But in the short term, we might not pay *too much attention to it. At least that’s the view of our friend Teddy Fusaro from Bitwise.
“People overestimate the impact of spot Bitcoin ETF flows on the overall cryptocurrency market in the near term,” Fusaro said in a message to this columnist. “Recent average daily cryptocurrency spot trading volume across all cryptocurrency exchanges has been close to $100 billion. Meanwhile, while the market has rebounded, the spot Bitcoin ETF saw net OUT flows of $262 million yesterday. Spot Bit Coin ETF flows are important, but they are just one piece – they are part of a much larger and more dynamic market.”
Of course, it is difficult not to check the flow. Just like it would be difficult not to verify my Coinbase account. And degens avoid chain confirmation. However, according to GSR’s Brian Rudick, market participants appear to be becoming increasingly accustomed to near-term negative trends as part of the Bitcoin story.
“I am a little surprised to see that BTC is holding off spot ETF outflows for the third day, but it seems like more people are watching and appreciating the inflow numbers. I expect flows to be more volatile. Impact on price. “This has decreased somewhat,” he said.
“I know it’s because of the macro, but I’m actually more confused about ETH performing so well considering the SEC is trying to name it a security and I just posted a couple of tweets analysis of why I’m confused and what it is. “I did. It could mean here.”
So just watch the flow. But do so with some caution.
This piece was first published March 21 in Chaparro’s biweekly The Scoop newsletter. Sign up now.
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