The 10 Bitcoin Exchange Traded Funds for the spot market they reported the largest outflow of funds for three days since its launch on January 11. This configures a resounding reversal of flows of entry, which contributed to the cryptocurrency reaching an all-time high above US$73,000 last week.
In this way, more than US$742 million were drained, consisting of US$1.4 billion of outflows from the fund. Grayscale Bitcoin Trust this week alone, plus a slower pace of entries into offerings from BlackRock and Fidelity, respectively, the second and third most popular products.
This Friday the Bitcoin experiences an abrupt drop of 3.6%, and is positioned below US$65,000, although it would seem like an achievement, since it recovered from US$60,000 on Wednesday. So the question arises about how much influence capital outflow from ETFs in Bitcoin’s negative streak.
Bitcoin ETF: the exit of funds
Ambit He inquired with experts from the crypto market to find the reason for the exit of exchange-traded funds, in the midst of an unprecedented euphoria to enter them. In that context, Diego Gutierrez Zaldivarpresident and co-founder of IOVlabs (Rootstock & RIF) analyzes the context.
“The main reason for the high volatility in ETFs “It is mainly due to the majority participation of retail investors instead of institutional and professional investors,” the expert begins by explaining. He exemplifies that EBIT, an ETF sponsored by BlackRock, recorded average operations of around US$13,000 “which indicates that most investors are speculative and influenced for news and price movements”.
Gutiérrez maintains that, when ETF value starts to decline, “these investors tend to sell,” which can trigger a downward spiral and reverse previous gains. That would generate, thus, a self-fulfilling prophecy.
“It is different when institutional investors invest, thinking about a much longer time horizon.” But, those actors have not entered yet, she warns. “Now, thanks to the ETF, they have the vehicle to do it.”.
For crypto market analysts it is not unusual to see changes in ETF flows based on the price action in the underlying asset class, as well as whether Bitcoin has retreated. The explanation is simple among experts, “the Bitcoin spot ETFwhich cannot be expected to absorb new money every day.
Bitcoin: what’s happening with the price
About the price drop in the BitcoinGutiérrez maintains that it is due to the participation of retail investors who entered the market basically driven by the FOMO, or “Fear of Missing Out”which in Spanish translates to “Fear of Missing Something.”
“When these investors observed that the price was beginning to retreat, they chose to exit the market, which validated the price drop.“says the expert consulted by this means.
Despite recent departures, ETFs Overall they boast net receipts of more than $11.4 billion to date, making their releases some of the most successful yet.
First of all, calm down: the halving is in sight
While Bitcoin has dropped 18% from its all-time high of $73,850, mainly due to selling pressure from Grayscalewhich doubled its sales BTCother investment funds, such as blackrockmaintain a large volume of purchases in a week of falls, “which indicates a diversity of positions in the market,” he maintains. Matteo Taronnaanalyst Bitgetin conversation with this medium.
For the analyst, it is relevant to highlight that although ETFs “They have a great impact on the market“, we must not lose sight of the proximity of the halving, an event that “traditionally“It is anticipated with declines of between 10% and 25%” from Bitcoin’s highs, a pattern that has been repeated in each halving and “that is currently taking place“, as Taronna explains well.
Lastly, the analyst maintains that in terms of price action, a decline in Grayscale sales could lead to a significant rise in major altcoinswhich should lead to a position neutral/bullish towards the end of March. Conversely, if Grayscale continues its selling pressure, ““The response of the price of Bitcoin will depend on the activity of other investment funds to resume the upward trend.”.
Furthermore, it is worth remembering that in terms of onchain analysis, “the main historical sellers of Bitcoin have reduced their activity” since mid-January, suggesting that miners are expecting higher prices in the coming months. A key fact not to lose sight of.
Source: Ambito
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