Bitcoin Value Drops Amid Hong Kong ETF's Lackluster Debut and Macro-Economic Concerns
Summary:
Bitcoin's value took a hit following the underwhelming launch of a spot BTC ETF in Hong Kong that generated only a fraction of the expected demand. Other contributing factors include weak macroeconomic conditions and diminished U.S. spot BTC ETF inflows. Despite the drop in price, the annualized premium for BTC futures maintained a neutral level. The U.S. Federal Reserve's anticipated moves and economic indicators, such as McDonald's minimal year-over-year earnings growth and Volkswagen's sales drop, suggest an apprehension of economic slow-down.
Bitcoin (BTC) took a significant downward turn on April 30 in the wake of the unremarkable debut of a Bitcoin exchange-traded fund (ETF) in Hong Kong. Against an anticipated demand of $140 million, the inaugural day of trading, which included Ether (ETH) ETFs, could only muster $12.4 million. Bitcoin futures saw their premium fall to a five-month low, pointing to a potential bearish shift. Weak macroeconomic scenarios and reduced spot BTC ETF movement from the U.S. are adding to the downward pressure.
Analysts caution against jumping to hasty conclusions, as other factors are affecting Bitcoin's value. These factors include dwindling faith in the U.S. Federal Reserve's (Fed) capability to cut interest rates twice by 2024. Hopes are pinned on Fed Chair Jerome Powell's statement set for May 1, which is causing cryptocurrency players to tread lightly.
Decreased inflows into U.S-based spot Bitcoin ETFs for the fourth consecutive day have sparked worries among traders. Investors are backing off from the Grayscale GBTC ETF due to high charges, and the Blackrock IBIT ETF seems largely inactive. Despite the uninspiring performance of the Hong Kong spot ETF, interest in the U.S. for such investments does seem to be diminishing.
Before this event, the Hong Kong exchange (HKEX) had introduced cryptocurrency ETFs based on futures contracts which had ushered in $529 million net inflows in Q1 2024. Hence, the weak performance of the spot instrument introduced on April 30 did come as a surprise. Analysts like Bloomberg’s Eric Balchunas argue that bad timing could be the culprit for the lackluster trading volume.
Investors should also note that the S&P 500 is on track for its first negative monthly record in six months since April, and the U.S. 5-year Treasury notes’ yields have risen from 4.2% to 4.7% over the month, indicating higher return demands from investors. Fearing inflation growth or U.S. debt increase, traders tend to step away from fixed-income positions if market liquidity needs to be ramped up, as it will devalue these bonds.
Bitcoin’s recent fall in price to $60,172 on April 30 might be an indicator of an apprehension of an economic downturn. Reports of McDonald's having a slight 2% year-over-year profit increase and automaker Volkswagen's declaration of a 2% fall in Q1 2024 sales are compounding these fears.
In the wake of these events, the decrease in interest from institutional investors in Bitcoin ETFs and the instability in conventional markets, it's hardly unexpected that the BTC futures premium hit a five-month low. In balanced market conditions, month-long contracts usually trade at a 5% to 10% premium over spot markets due to their extended settlement periods.
Laevitas.ch reveals that on April 30, the yearly premium for BTC futures fell to 7.5%, down from 11% just one week before. Although sentiment deteriorated, this metric stayed at a neutral level—a relatively positive sign considering that the price of Bitcoin had fallen 9.5% in the prior week.
Assessing the Bitcoin options skew is also necessary for a more precise understanding of market sentiment. A skew metric greater than 7% generally signals price fall expectations, while a skew below -7% means bullish sentiment.
The Bitcoin options delta skew changed from a bullish -7% on April 28 to a neutral 1% at present, implying a balanced call (buy) and put (sell) options demand. This transition suggests that investors had initially high hopes for the Hong Kong spot ETF launch but promptly recalibrated their expectations in the light of lackluster trading volumes. Hence, the dip in the Bitcoin futures premium shouldn't unduly alarm traders.
Disclaimer: This article isn't investment advice or a recommendation. All investments and trading activities carry risk, and individuals need to conduct their due diligence before making a decision.
Published At
4/30/2024 10:21:10 PM
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