Despite a record 19-day streak of inflows into U.S.-based spot Bitcoin ETFs, Bitcoin's price remains stagnant. Analysts explain the complex factors influencing BTC's performance and why significant price surges may require broader ETF adoption and reduced long-term holder selling.
Despite a record-setting 19-day streak of inflows into U.S.-based spot Bitcoin exchange-traded funds (ETFs), the price of Bitcoin remains below its all-time high of $73,679 set in March. This has led many investors and traders to question why these substantial inflows have not translated into a corresponding surge in Bitcoin's price. Analysts and market experts believe they have the answers.
As of June 6, spot Bitcoin ETFs globally hold approximately 1.3 million Bitcoin, representing 5.2% of the circulating BTC supply. A significant portion of this is held by U.S.-listed ETFs, according to data from HODL15Capital. Despite this, the influence of ETFs on the overall market remains limited.
Charles Edwards, founder of Capriole Investments, emphasizes that ETF inflows alone are not sufficient to drive the entire market higher. "ETF flows are fantastic, but they are not strong enough to exceed the entire ecosystem selling (yet)," Edwards told Cointelegraph.
Christopher Inks, a crypto trader, echoed this sentiment, highlighting that Bitcoin's price is determined by a multitude of factors. "You do realize the market is made up of spot, futures, ETFs, and options, right? Price at any point in time is a product of all of these, not just one of them," Inks wrote in a June 7 X post.
Moreover, macroeconomic factors and geopolitical events play a more substantial role in influencing Bitcoin's price than ETF activity alone. Radar Bear, co-founder of a cryptocurrency exchange, explained to Cointelegraph, "ETFs are important, but the price of BTC is more heavily influenced by macroeconomic factors and geopolitical events."
According to data from Farside, Bitcoin ETF net inflows on June 6 totaled $217.7 million. Since their inception, spot Bitcoin ETFs have attracted over $15.5 billion in inflows. However, some traders believe this amount is still too small to significantly impact Bitcoin prices until ETFs are available in other major markets.
"There are still no spot Bitcoin ETFs in the U.K. or Japan, two major markets. There is lots of room to grow," stated Timothy Peterson, founder of Cane Island Alternative Advisors.
Following the approval of spot Bitcoin ETFs on January 10, Bitcoin surged nearly 53%, reaching an all-time high of $73,679 by March 13. However, in the nearly three months since then, Bitcoin has failed to rally further, trading mainly within the range of its high and the $60,000 support level.
A significant factor in Bitcoin's price stagnation is the behavior of long-term holders. Charles Edwards pointed out that for another substantial price surge to occur, confirmation of one of three major factors is needed: higher average ETF buying, reduced selling by long-term holders, and growth in U.S. or global liquidity.
"Long-term holder selling is a significant factor," Edwards noted, adding that individuals who have held Bitcoin for more than two years have been selling more frequently in 2024. This group's share of the total Bitcoin supply has dropped slightly to 54% over the past six months. While a 3% reduction might seem minor, it represents approximately 630,000 Bitcoin, which is about three times the total amount purchased by all Bitcoin ETFs in the U.S.
Edwards also highlighted that the effects of the upcoming Bitcoin halving have not yet been realized. The halving event, which reduces the daily Bitcoin issuance by 50%, is expected to have significant long-term impacts on Bitcoin's supply and demand dynamics. "We likely haven’t seen the impacts of the Halving, with the daily Bitcoin issuance dropping by 50% in March. We will likely see the delta between ETF consumption and Bitcoin mined widen substantially over the next 12 months," he explained.
In summary, while the recent inflows into U.S.-based spot Bitcoin ETFs are a positive indicator, they are not sufficient on their own to drive Bitcoin's price to new heights. The market is influenced by a complex interplay of factors, including macroeconomic conditions, geopolitical events, and the behavior of long-term holders. For Bitcoin to experience a significant price surge, broader ETF adoption in other major markets and a reduction in long-term holder selling may be necessary. Additionally, the impending effects of the Bitcoin halving could further shape the market dynamics in the coming year.
(CIARAN LYONS, COINTELEGRAPh, 2024)