Bullish Momentum Stalls Despite Bitcoin ETF Launch: Analysts Debate Causes and Future Implications
Summary:
Despite the initiation of Bitcoin (BTC) exchange-traded fund (ETF) trading on January 12, Bitcoin's bullish momentum has been lackluster. Analysts suggest that delayed interest rate cuts and an outflow from the Grayscale GBTC Trust ETF may contribute to this. An increase in leveraged long positions on Bitfinex has also led to speculation about a possible Bitcoin bull run, however, this could be due to arbitrage with derivatives or the spot ETF, rather than market influence. Factors such as sustained high interest rates may lead to Bitcoin’s price dropping below $35,000 by March, but the dominance of bullish positions across futures and margin markets suggests traders' confidence in Bitcoin's future prospects.
Discussions are underway among Bitcoin (BTC) enthusiasts as they grapple to understand ongoing restraint in bullish activity despite the launch of the Bitcoin exchange-traded fund (ETF) since the 12th of January this year. Several reasons have been pointed to explain the sluggish price progression, yet no definitive conclusion has been reached. Meanwhile, there's been a significant uptick in leveraged long positions via BTC margin on Bitfinex, reaching a whopping $3 billion. This suggests that heavy-hitting Bitcoin traders are gearing up for a surge in Bitcoin's future value.
Analysts have identified the outflow from the GBTC ETF and broader economic issues as possible culprits. Noted personalities like BitMEX's Arthur Hayes suggest that the delayed interest rate cuts from the U.S. Federal Reserve (Fed), anticipated as early as March, may be a contributing factor. The expectations for the rate cut have been considerably hampered due to recent inflation-related occurrences. Hayes predicts that the Fed's decision not to extend its Bank Term Funding Program (BTFP) could strain regional banks in the U.S., withdrawing liquidity from risky markets and adversely affecting Bitcoin's value.
Hayes theorizes that persistently high interest rates disincentivize investors to move away from fixed-income positions, predicting that these conditions might push Bitcoin's price below $35,000 by March. Although this explanation is plausible, it does not justify the sustained strength of other higher-risk markets, such as the SPDR Bloomberg High Yield Bond ETF (JNK), currently trading slightly below its five-month high at $95.
Further uncertainty for Bitcoin stakeholders arises from the outflow from the Grayscale GBTC Trust ETF – a risk that's been in discussion for some time. Statistics collected since January 18 reveal that spot Bitcoin ETF players including BlackRock, Fidelity, ARK 21Shares, and Bitwise have drawn in 84% of equivalent Bitcoin exiting GBTC. Therefore, it's improbable that an average daily net outflow of $87 million made Bitcoin dip below $40,000 and experience its worst performance since December 2023.
Increased BTC long positions on Bitfinex doesn't guarantee bullish activity, especially when considering a 10% increase in the platform's $3 billion Bitcoin margin position since January 17. This development fuels the idea that such margin trades hold a market-neutral position, meaning borrowers aren't leveraged with the proceeds. Most probably, there are arbitrage operations involving derivative or spot ETF instruments at play.
Presently, Bitfinex hosts 74,738 BTC margin longs (positive), dramatically outpacing the 445 BTC margin shorts (negative), which has consistently hovered below 2,500 BTC over the past year. This imbalance can be partially attributed to the minuscule 0.01% BTC yearly margin funding rate, which spurs borrowing, regardless of short-term potential.
A careful examination of data is necessary to determine if the oddity only impacts margin markets, taking into consideration the risks, liquidity, and availability specific to each exchange. For instance, assessing the ratio of net long-to-short positions of leading traders across perpetual and quarterly futures contracts provides a more comprehensive understanding.
Starting from January 17, top traders at OKX began with a 1.58 long-to-short ratio that rose until January 22, then flipped as BTC slid below $41,000. Meanwhile, Binance data showed a 1.35 long-favoring ratio on January 17, closing at 1.39 on January 25. This implies top traders weren't perturbed by the recent drop in Bitcoin prices.
The spike in Bitfinex BTC margin longs most likely suggests arbitrage with negligible market influence. Yet, the overwhelming dominance of bullish positions across futures and margin markets points to traders' faith in Bitcoin's prospective performance.
Published At
1/25/2024 10:37:36 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.