Bitcoin's Strength Tested as Spot ETFs Record First Week of Outflows
Summary:
The spot Bitcoin (BTC) exchange-traded funds (ETFs) recently recorded their first week of net outflows, raising concerns about the sustainability of Bitcoin's rally. Despite institutional inflows pointing at being a key driver for Bitcoin's peaks, the evidence shows Bitcoin's bullish momentum isn't only reliant on spot ETF inflows. The approval of a $1.2 trillion spending package by the US is seen as a vital positive catalyst for Bitcoin. With Bitcoin's price already up 64% year-to-date in 2024, those anticipating a dip may be left behind. The article also emphasizes remaining steady amid the drop below $62,000, indicating strong price resilience and strengthening $70,000 support level.
Between March 18 and March 22, the recently introduced Bitcoin (BTC) exchange-traded funds (ETFs) witnessed their initial weekly net outflows, with an overall amount of $888 million being pulled out. This significant drawback, compared to the previous week's inflow of $2.57 billion, raises questions about the sustainability of Bitcoin's surge to $70,000 on March 25.Not needing spot BTC ETF inflows for a Bitcoin Rally There has been argument amongst market players that institutional inflows are the main factor behind Bitcoin's record-breaking high of $73,755 on March 14, making the 9% increase from March 23 to March 25 questionable. Adding to these doubts is the rally happening at a time when the S&P 500 index failed to hold onto its record high of 5,260 set on March 21.Analyst venturefoundΞr hinted on March 20 that Bitcoin's reality was being checked following a boost to a new record by ETF investors suffering from FOMO before the halving, effectively leaving those who purchased at the peak in a bind. Although a rise of 15% from March 20 to March 25 doesn't immediately address bearish worries, it points out that Bitcoin's positive momentum isn't entirely dependent on spot ETF inflows.The $1.2 trillion spending package approved by the US on March 23 is considered a major positive factor for Bitcoin by some traders. This is especially true considering the U.S. Federal Reserve's prediction for three rate cuts over 2024. As the U.S. deficit is projected to hit $1.6 trillion in 2024, the emphasis on repaying government debt strengthens with interest rates expected to stay above 5.25%.Witnessing all-time high surges in value for scarcity assets such as gold, Bitcoin, real estate, and the stock market indicates a weaker U.S. dollar. This weak dollar performance against the euro and the British pound is trivial as investors look for a haven from fiat currency losses.It might too soon to infer that Bitcoin's price will continue rising due to monetary expansion. However, bears suggesting that the U.S. fiscal path will cause a recession and adversely impact risky assets overlook the important fact that: Bitcoin's price has already soared by 64% in 2024, leaving those anticipating a dip behind.Bitcoin derivatives remained steady during the drop below $62,000.To discern if professional traders have become more pessimistic about Bitcoin following disappointing spot ETF inflow data, reviewing the BTC monthly futures contracts is beneficial. In unbiased markets, these contracts typically offer a premium that's 5% to 10% higher, accounting for the extended settlement period.The recent data reveals that the annual BTC futures premium was hardly impacted by the net outflows of spot ETF. Right now, an 18% point is perceived optimistic, suggesting buyers are ready to pay extra to initiate leveraged long positions.Assessment of the Bitcoin options market is vital to establish if the March rally to $70,000 has escalated the demand for strategies to hedge against possible price corrections. If a Bitcoin price decline is expected by traders, the skew metric exceeds 7%, while periods of enthusiasm are often marked below 7%.Bitcoin derivatives markets suggest strong price resilience despite the recent outflows from spot ETF, which supports the notion that the $70,000 support level is consolidating.Please note that this article does not provide investment guidance or suggestions. All investments and trading activities have risks, and readers should undertake their research before making decisions.
Published At
3/25/2024 11:40:00 PM
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