The recent volatility of Bitcoin prices in Asia is closely related to the automated trading algorithms which monitor US Exchange-Traded Funds (ETFs). According to BloombergThis algorithmic trading reaction to daily US-ETF flow data has caused pronounced fluctuations in Bitcoin during Asian trading.
Bitcoin Prices are sunk by trading algorithms
Bitcoins trigger steep declineOn Tuesday morning, Asia witnessed the biggest drop since a whole month. It was also released that US ETF data showed a net outflow of funds.
Shiliang Tang of Arbelos Markets highlighted the impact algorithmic trading has on market movement. “From an algorithmic trading perspective, bots can basically auto-scrape this data and buy and sell based on this,” Tang explained. “It seems that’s basically what is happening.”
Since the introduction of Bitcoin ETFs to the United States in January 2011, a total investment amount of $12 billion has been made. Inflows into these ETFs were brisk, particularly in the first two-thirds of March. This pushed Bitcoin up to an all-time high of $73,798. Although the top cryptocurrency is down 17.6%, it has fluctuated in and out of the market.
The pattern of flow has had a significant impact on the Asian markets’ returns. February and March saw a particularly high performance that declined later in the year. Coinglass reported that algorithmic protocols have a significant impact on Bitcoin’s price, not just on the spot market but also on derivatives. On Tuesday alone, Coinglass liquidated about $357,000,000 in bullish cryptobets.
Charlie Morris, Chief investment officer at ByteTree Asset Management pointed out that ETF flows are more significant for Bitcoin than gold. He noted that 5,5% of Bitcoin was held in ETFs compared with 1% of gold. gold. ETF flows are therefore a critical component for Bitcoin market fluctuations.
Jakob Kronbichler of Clearpool Finance and other market participants have highlighted the responsiveness of the markets to ETF data. They also suggest that the recent correction is a normal pause in the market. “take a bit of a breather” amidst widespread excitement.
Spot ETFs Earn $40 Million
Blackrock contributed $150.5 million to the Bitcoin ETFs yesterday, which was a major factor in driving up the price. ARK, on the other hand, had a difficult day, with outflows of $87.9 millions, despite $200 million worth of inflows in the week prior. Grayscale’s GBTC experienced relatively low outflows of $81.9 million.
WhalePanda, a renowned analyst commented on the comment. “Maybe profit taking after Q1? Speculation though. […] Mondays always seem to have the most outflows and wondering if end of Q1 had something to do with it as I suspect. Price crashed further on US government moving/selling some of the BTC from Silk Road. Better to sell here than at $100k or $200k. 17 days until halving.”
BTC was trading at $66,398 as of the time this article went to press.
Featured image created with DALL·E, chart from TradingView.com
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