Changes in Market Dynamic Following the Launch of BTC ETFs
Off-shore futures trading dominated Bitcoin markets since 2019, but now Wall Street is taking the lead
The changes brought on by Bitcoin ETFs are yet to be fully understood. Until January, investor activity was more easily monitored thanks to the transparency of blockchains and internet-based exchanges. Now, on-chain analysts need figure out ways to understand investing patterns by comparing ETF flows to their on-chain Bitcoin vaults.
Since 2018, perpetual Bitcoin swaps dominated Bitcoin’s pricing, becoming the most liquid Bitcoin market since 2019. Now, American ETFs are becoming more dominant in setting the price. Additionally, CME Bitcoin futures have overtaken Binance in open interest (the amount of money betting on the contract) for several months. We’ll look into how dominant the ETFs are becoming in our next post. Next, we will look at some of the interesting changes and events in the market following the ETF launches:
The launch of US Bitcoin ETFs on January 11th was followed by a drop to $38,500 on January 22nd. In the following weeks metrics like Bitcoin futures funding rates and volume, which usually explode during Bitcoin rallies, were eerily quiet as Bitcoin rose by 43% percent to $54,500.
Meanwhile institutional-size accounts— accounts holding tens of millions of bitcoin per-blockchain-address— accumulated 247,500 BTC.
The entire month of January was marked by retail selling to whales. Crypto native traders only stopped being apathetic when price passed $54,00 on Tuesday February 26th.
On-chain sleuths say they identified many of these accounts as belonging to ETF issuers such as BlackRock, due to their correlated with the sums and timing of the public ETF inflows.
On Tuesday, after breaking $54,500 the crypto native market woke up and funding spiked as well as volumes. An exhilarating jump to close to $65,000 with over $1 billion in ETF inflows commenced.
Sign of life from the retail audience and high prices signaled some big investors to cash out. According to the on-chain analytics- while bitcoin jumped from $57,000 to $61,000 - 133,000 bitcoins were sold, netting around $6.66bn. This was the biggest one day of profit taking in Bitcoin’s history, counting in dollars.