On Tuesday, as Bitcoin’s price dipped to $62.000, we speculated whether the inflow into certain ETFs, notably BlackRock’s IBIT and Fidelity’s FBTC, would counterbalance the outflow from Grayscale’s GBTC. The trend has since intensified, with all the ETFs combined experiencing net outflows of $326.2 million on Tuesday, $261.5 million on Wednesday, and $94.0 million yesterday. Since Wednesday, Bitcoin`s value did somewhat stabilize at approximately $67.000, a shift many attributed to Federal Reserve Chairman Jerome Powell and Wednesdays events. At the time of writing, however, Bitcoin is down to about $63.000 again.
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Wednesday was a day of significance. Among the leading Bitcoin spot ETFs, BlackRock’s IBIT distinguished itself with inflows into the fund totaling a mere $49.3 million, a stark contrast to the 30-day average of $351 million leading up to Wednesday. Fidelity’s FBTC, the other behemoth, closed Wednesday even lower at $12.9 million in inflow. Given that outflows from GBTC were $443.5 million on Tuesday, $386.6 million on Wednesday, and $358.8 million yesterday, consistently in the mid nine figures, the pace must accelerate among the other funds if the trend is to reverse. It`s worth mentioning that IBIT managed to bring in $233.4 million yesterday, yet FBTC recorded its lowest inflow to date at a meagre $2.9 million. On a positive note, Eric Balchunas suggests that the substantial withdrawals from GBTC are likely due to “old fun” (as in bankruptcies), predicting that the scale of the withdrawals will soon diminish.
We reiterate that it is impossible to pinpoint exact causes for Bitcoin’s price fluctuations unless they are exceedingly apparent. However, we posit that the inflow and outflow of the ETFs fundamentally drive Bitcoin’s price, as ETF providers must either acquire or sell Bitcoin based on the ETFs’ demand or lack thereof. This dynamic directly influences Bitcoin’s price by creating buying or selling pressure - a dynamic which will be all the more apparent as the supply of new Bitcoins will be halved approximately 30 days from now. However, different narratives can cause Bitcoin to diverge from fundamental factors such as the Bitcoin halving and the Bitcoin spot ETFs and this apparently took effect after the FEDs policy meeting on Wednesday. Should a new narrative emerge and catch interest, it may overshadow the importance of the ETFs in the very short-term picture, though it seems unlikely.
The change in narrative seems to have been the situation two days ago; Jerome Powell’s statements on Wednesday were interpreted positively by the market, propelling all indicators upwards. The tech-heavy Nasdaq reached an all-time high, as did the industry-heavy Dow Jones and the crucial S&P 500. With the world’s most influential stock indices peaking, Bitcoin followed suit, surging from approximately $62.000 to nearly $68.000 within a few hours and currently hovering back around $63.000 again. Powell’s statements and the Federal Reserve’s stance are clearly more than just another narrative, but in such a volatile, 24/7 market, one story can quickly replace another when something noteworthy occurs. To state the obvious: a future characterized by lower interest rates, slower quantitative tightening and risk-on is undoubtedly an environment in which Bitcoin thrives. That being said, the net ETF outflows is undoubtedly taking its toll and todays ETF numbers will most likely decide Bitcoin`s faith heading into the weekend.
This text is intended to inform and is not an investment recommendation.
Best regards and have a nice weekend,
Adam Jakobsen.
NBX.
