In the last two days, Bitcoin’s price has dropped by more than 10%, surprising many people because the crypto market had been stable for a while. This drop has made investors wonder if Bitcoin ETFs in the US are causing the fall in price. Reports show that a lot of Bitcoin has been taken out of these ETFs.
Vetle Lunde, a researcher at K33 Research, pointed out on X that the amount of Bitcoin taken out of these ETFs is very high. “Yesterday, 14,579 BTC were taken out of Bitcoin ETFs around the world, which is the biggest amount since US Bitcoin ETFs started. Outflows have been happening a lot in February. 69% of the trading days this month ended with Bitcoin being taken out of these ETFs,” he said.
Are Bitcoin ETFs To Blame?
These numbers show that there’s been a lot of selling pressure in the Bitcoin ETF market. Lunde points out that what’s important isn’t just the big drop in outflows on one day, but that it’s been happening regularly throughout February.
However, not everyone thinks these large outflows mean the market is in trouble. Adam (@abetrade) from Trading Riot says that big changes in ETF flows have often happened before market drops, but those drops usually bounce back to normal after a while. He mentioned that, except for a big change after Trump’s win in November 2016, big outflows or inflows often cause people to panic and sell, which can lead to prices rising again.
Adam thinks the current situation might be an overreaction. Once the panic selling slows down, the market could settle or even go up. He believes that in the past, big moves in the market have often been followed by the market moving in the opposite direction.
Also, what’s happening in the futures market adds more confusion. Zaheer Ebtikar, an investor, connects the ETF outflows to changes in futures prices. Recently, CME Futures were priced much higher than regular cryptocurrency exchanges, but now the difference has dropped to under 5%, which is closer to a safer rate.
Ebtikar said that this change has been important. As futures prices adjusted, people seemed to give up on Bitcoin ETFs, and CME Futures interest dropped to its lowest point since the last election. This drop in interest, along with high trading volumes, shows that investors are being more careful with Bitcoin ETFs but still trading in futures markets.
The shift between lower futures prices and higher futures volume is a strange situation. Ebtikar summed it up, saying, “It’s like a paradox: as futures prices go down, futures get more interest and ETFs start to drop. The big clue here is that CME Futures trading volume has been really high recently, close to record highs since the last election.”
Macro Headwinds
Economic concerns are affecting both crypto and traditional markets. QCP Capital, based in Singapore, calls this a “global risk-off move” impacting stocks, gold, and Bitcoin, as fears of stagflation grow. Consumer confidence has dropped, shown by a lower-than-expected Consumer Confidence Index of 98 (instead of the expected 103). Additionally, new tariffs of 25% on imports from Canada and Mexico, starting on March 3, have made people more uncertain.
QCP Capital believes investors are getting worried about possible trade tensions and high inflation, which together create an uncertain environment. The once-popular “Magnificent 7” stock trade is starting to fall apart, and “long crypto” (betting on rising crypto prices) is seen as an overextended position. In uncertain markets, crypto is often the first to be sold, adding to the downward pressure on prices.
Looking ahead, QCP Capital points to two key events that could affect the market. First, the earnings report from NVIDIA, which has benefited from AI demand, could lead to a further drop if the report is disappointing. The second event is the upcoming Personal Consumption Expenditures (PCE) data, expected to show a 2.5% increase year-over-year, still above the Federal Reserve’s 2% target. As long as inflation stays high, the Fed is likely to keep interest rates steady. Markets are currently expecting two rate cuts in 2025, possibly starting in June or July.
QCP Capital warns that the markets are still fragile and advises caution, as consumer and retail sentiment surveys, which often predict economic trends, could give early signs of stagflation.
As of now, Bitcoin is trading at $87,818.
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