Bitcoin’s recent price volatility in Asia is closely linked to automated trading algorithms that monitor flows in US exchange-traded funds (ETFs). According to BloombergThis algorithmic trading response to daily US ETF flow data causes pronounced swings in Bitcoin prices during Asian trading hours.
Trading Algos Spoil Bitcoin Price
The trigger for Bitcoin’s steep decline, its worst decline in a month, was observed in Asia on Tuesday morning. This downturn coincided with the release of US ETF flow data, which indicated a net withdrawal of investments.
Shiliang Tang, president of Arbelos Markets, highlighted the impact of algorithmic trading on these market movements. “From an algorithmic trading perspective, bots can basically collect this data automatically and buy and sell based on it,” Tang explains. “It appears that this is actually what is happening.”
The launch of several Bitcoin ETFs in the United States on January 11 has since attracted a net $12 billion in investments. These ETFs saw a surge in inflows, especially in the first half of March, pushing Bitcoin to an all-time high of $73,798. However, the leading cryptocurrency has seen a decline of up to 17.6% from this peak, amid fluctuating inflows and outflows within the sector.
This flow pattern has had a particular impact on Asian market returns, with February and early March in particular showing strong performance, which tapered off later in the month. The influence of algorithmic protocols on the price of Bitcoin not only affects the spot market, but also extends to derivatives. Coinglass reports approximately $357 million in bullish crypto bets on Tuesday alone.
Charlie Morris, Chief Investment Officer at ByteTree Asset Management, pointed out the importance of ETF flows for Bitcoin compared to gold, noting that 5.5% of Bitcoin is held in ETFs, compared to 1% for gold. This makes ETF flows a more crucial factor for Bitcoin market movements.
Market participants such as Jakob Kronbichler, co-founder of Clearpool Finance, are highlighting the market’s responsiveness to ETF flow data and suggesting the recent correction is a natural pause for the market to “take a breath” amid widespread excitement.
Spot ETFs raise $40 million
Yesterday, all spot Bitcoin ETFs experienced inflows totaling $40.3 million, mainly due to Blackrock’s significant contribution of $150.5 million, which played a crucial role in boosting the market. On the contrary, ARK faced a challenging day with an outflow of $87.9 million despite an inflow of $200 million the week before. Grayscale’s GBTC had a fairly low outflow of $81.9 million.
Renowned analyst WhalePanda commented: “Possibly profit taking after Q1? Speculation yes. […] Mondays always seem to have the most outflows and I wonder if the end of the first quarter has something to do with that, as I suspect. The price fell further as the US government moved/sold some of Silk Road’s BTC. Better to sell here than for $100,000 or $200,000. 17 days until the halving.”
At the time of writing, BTC was trading at $66,398.
Featured image created with DALL·E, chart from TradingView.com
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