Bitcoin’s flow into various ETF vehicles was relentless leading up to its all-time high. Notably, BlackRock ETF and other funds played a significant role in driving the bull run in Q1 2024. However, the trend for Bitcoin ETFs is now shifting as the cryptocurrency experiences a significant correction from its highs.
BTC’s price dipped to $57,305.90 following a slide from the $65,000 range, briefly even falling below $57,000. The question now is whether ETF buyers will seize the opportunity to buy the dip or become hesitant and pursue other investments.
During the lows, BTC volumes more than doubled, reaching $49 billion in a 24-hour period. However, the level of exchange activity doesn’t necessarily reflect the interest of mainstream finance investors in Bitcoin products.
Bitcoin ETFs are now showing signs of diminished inflows. As of May 1, these funds experienced net outflows, with no fund attracting net inflows. This indicates that ETF buyers are not inclined to “hodl” during turbulent times.
BlackRock iShares Bitcoin, the most high-profile ETF with the largest inflows, also witnessed the biggest net slide in the past day. This product played a key role in exposing Bitcoin to a wider audience, becoming the largest fund to hold the equivalent of 273,824 BTC.
Currently, US-based ETFs are experiencing the largest outflows, while smaller international funds in Canada, the EU, and Hong Kong are not seeing net withdrawals.
The Grayscale collection of funds can serve as an indicator of market sentiment. In the past, Grayscale traded at a significant premium or discount to the spot BTC price on centralized exchanges. Now, it appears that Grayscale is being affected by market panic in the same way, adding to the selling pressure. Activity tracking reveals that Grayscale is divesting some of its BTC holdings. While Grayscale buyers don’t directly hold physical Bitcoin, the company keeps the coins in custody and can potentially influence the market.
On Wednesday, there were indications that Grayscale may continue divesting. A large transaction from Grayscale wallets landed on Coinbase, with a high probability of further selling. The total transactions sum up to 4,000 BTC waiting to be divested. Grayscale moves its funds in portions and has accumulated a large selling position over the course of a few hours. Approximately a day ago, Grayscale began transferring 2,100 BTC and continued adding funds to its Coinbase wallet.
Grayscale’s actions are not an isolated incident but rather an indicator of a broader trend. However, the selling pressure from Grayscale surpasses that of several smaller funds combined.
Typically, ETFs are expected to hold their coins in cold wallets on behalf of their users. However, traditional traders currently seem to be devaluing BTC.
Grayscale’s GBTC fund is once again trading at a discount, indicating waning interest in Bitcoin as an investment. GBTC reached levels equivalent to $52,000-$50,000 per BTC.
The sentiment surrounding Bitcoin has shifted to fear, with the Bitcoin fear and greed index entering “fear” territory for the first time in three months. Currently at a level of 48, the index has dipped from “extreme greed” just four weeks ago. This shift to fear followed the 20% correction from the all-time high.
BTC prices are now creating a scenario of fear, suggesting that the bull market may have reached its peak. The expectation for 2024 was for continued expansion, with the possibility of new all-time highs by the end of the year.
At present, BTC is experiencing a battle between external investors and loyal “hodlers”. The selling of ETF coins may trigger another “bear whale” event, where other buyers take on the risk of the current dip.
This selling is taking place in a post-halving market, where physical BTC coins may become more scarce. The BTC/USDT trading pair on Binance is showing a nearly perfect balance between buyers and sellers, with trades occurring above the $57,000 level. Despite the fear, there is still demand for actual BTC, and the market may absorb the newly introduced coins.
