Spot Bitcoin ETF net inflows have dropped considerably. The article noticed that inflows into the crypto-backed funds have continued to rise in contrast to the daily mining output.
However, the demand for the product has somewhat slowed down. The flagship currency underwent the fourth halving on 20th April.
Popularity of Spot Bitcoin ETFs
Spot Bitcoin ETFs gained massive popularity after approval at the start of the year in 2024. These investment products set a precedent for increasing inflows into Bitcoin by introducing institutional and traditional finance investment interest.
The Securities and Exchange Commission approved 11 spot Bitcoin ETFs during the first month of 2024.
The product gained $13 billion in capital inflows within a few months while Gold-based ETFs accomplish the same feat in years. The daily net inflow for Bitcoin spot ETFs reached as high as $1 billion during peak season. Institutional investors also shifted their investment from Grayscale Bitcoin Trust to new ETFs. Bitcoin halving is seen as an important event that repeats after every 4 years.
The Impact of Spot Bitcoin ETFs on Bitcoin Price Movement
As per the article, the halving of the total new supply of Bitcoin often leads to rise in demand while the supply crunches. This situation can build up to a supply shock leading up to the date of the halving event set to take place on 20th April.
However, this time around the inflows in Bitcoin are seemingly slowing down following weeks of uninterrupted positive net inflows in the token on account of Bitcoin ETFs.
Analysts opine that GBTC outflows could halt after the trust runs out of GBTC shares to sell. At the same time, the inflows in ETFs have turned to negative.
Before the Bitcoin halving spot Bitcoin ETFs recoded, multiple days of net outflows amounting to millions of dollars. Nevertheless, Bitfinex head Jag Kooner claimed that ETF demand will replenish promptly after the halving effect concludes.
He stated that inflow decline and loss of major outflows are not associated with halving but to SPX and NASDAQ downturns.
He also attributed the negative number to geopolitical changes. Bitcoin ETFs are often seen as alternative investments or a portion of the TradeFi portfolio. He stated that the situation is the product of rebalancing risks and diminishing risks of high-risk assets.
Upcoming Bullish Trend
Kooner noticed that Bitcoin’s meteoric rise since 2024 was not only on account of ETF approvals but also market participants who were excited to see its impact on Bitcoin prices. Therefore, the investors are anticipating the stabilization of flows that will pave the way for speculation about bullish tipping of flows with the return of bullish momentum.
The first 3 months of spot Bitcoin ETF inflows accounted for up to 10 times of daily mining supply. However, the high inflows in ETFs and heavy purchases from institutional players such as MicroStrategy have set up the stage for a post-halving supply shock.
Bybit report noticed that Bitcoin holdings on exchanges are set to deplete within the next 3 quarters after halving.
Another report published by CryptoQuant indicated that Bitcoin supply on centralized exchanges had dropped to a 3-year low of 1.94 million as of 19th April.
Ki Young Ju, CEO of CryptoQuant, predicted that Bitcoin is looking at a serious supply shock within 6 months of halving. However, during the final decimal of April, ETF demand paced out in comparison to net daily outflows.
The shifts in demand for ETFs suggested that by the end of March, Bitcoin underwent the first week of net outflows. Young further noticed that demand for ETFs has the potential to rebound if the Bitcoin prices achieve critical support with a $56,000 on-chain basis with new whales.
Kooner further stated that investors often ignore the impact of long-term holders on supply. He observed that major investments from long-term holders during the later stages.
