Source: Wall Street News

Since being approved for listing on January 11, Bitcoin ETFs have become a hot topic of concern in global capital markets. Over the past two months, they have continuously set records for capital inflows, which has also contributed to a sharp rise in Bitcoin's spot price this year.

On March 26, Citibank analysts David Glass and Alex Saunders pointed out in their report that in the 75 days after the listing of the Bitcoin ETF, the net inflow reached 11.3 billion US dollars, which explained nearly 50% of the Bitcoin price fluctuation. Starting March 20, ETFs continued to experience net outflows, which coincided with the timing of Bitcoin's price correction. After Bitcoin reached a record high, prices generally adjusted:

Following the launch of the Bitcoin ETF, the price of Bitcoin rose sharply in early February. However, after Bitcoin hits a record high, ETF marginal effects diminish and capital inflows slow, and the market may enter a volatile phase. Over the same period, macro-variables such as the US stock market, gold, and real interest rates had very little correlation with Bitcoin's return.

Bitcoin's spot and futures trading volume has increased significantly compared to before the ETF was launched, and the number of unclosed contracts has also increased dramatically. The futures market financing interest rate rose sharply after the introduction of ETFs and during the period of rapid price increases, reflecting strong demand for leveraged trading, but then declined somewhat and began to trend towards normal levels.

ETF traffic dominates Bitcoin's trend

Citi pointed out that after the listing of the Bitcoin ETF, trading activity in the cryptocurrency market increased significantly, capital inflows increased, and demand for leveraged trading also rose markedly, driving the rapid rise in cryptocurrency prices. However, as the market heat cooled slightly, trading activity and demand for leverage began to return to normal levels. The changes in these indicators are generally consistent with the trend of changes in cryptocurrency prices and ETF capital flows:

Since the ETF was launched on January 11, nearly 50% of Bitcoin's weekly price fluctuation can be explained by ETF net inflows. There was a sharp rebound after the ETF was launched, but as ETF inflows stopped, the rise began to slow down.

The trend in trading volume (spot+futures) and Bitcoin futures open contracts (OI) is generally consistent with the trend in cryptocurrency prices and ETF capital flows — weakening after the ETF was first launched, then began to pick up rapidly in early February.

The demand for leveraged trading by traders increased markedly during a period of rapid rise in cryptocurrency prices. This is confirmed by the sudden rise in funding rates for perpetual cryptocurrency futures contracts. The capital rate is an interest rate paid by the bulls to the bears, which represents the cost of capital for both the long and short sides of the market. When demand from bulls is strong and the market is bullish, capital rates will rise.

J.P. Morgan analyst Nikolaos Panigirtzoglou emphasized in an earlier report that the continued open positions in Bitcoin futures and falling ETF traffic are major signs that the price of Bitcoin is bearish. The net inflow rate of Bitcoin ETFs has slowed significantly, and there have been significant outflows over the past week, which has changed the picture of continuous one-way inflows of Bitcoin ETFs in the past.

Naeem Aslam, chief investment officer at Zaye Capital Markets, also warned that retail investors' enthusiasm is fading after Bitcoin's spot price hit a record high. He said that many people are questioning the strength of the Bitcoin price rebound and are worried that if the mood is unstable, Bitcoin will experience a serious correction and the price will fall below 50,000 dollars.

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