US Bitcoin Exchange Traded Funds have seen a run of historic inflows. This marks 17 days straight of net gains. These ETFs had a notable day on Tuesday. ETFs observed inflows Totaling an astounding $886.6 Million, it is the second highest single-day inflow since they were introduced.
The day before, there was another large inflow of capital, totaling $488.1 millions, which included contributions from Fidelity, Blackrock, and Ark. The price of Bitcoin, despite these large capital infusions, has remained relatively stable, moving from $68,000 up to $71,000 over the past week.
Market participants and analysts are puzzled at the muted movement of prices in response to substantial ETF inflows. Such inflows should typically exert more upward pressure on Bitcoin. The observed price dynamics, however, suggest other factors may be in play.
Why is the Bitcoin price not going higher?
The Kingfisher offers an analytical platform for crypto trading. explanation A post on X suggested that a carry-trade strategy could be influencing price dynamics. Their analysis suggests that “The BTC ETF inflows didn’t affect the price as much as you hoped it would? It might be due to a carry trade being loaded up. Short Futures + Buy Spot/ETF.”
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In this case, a carry trade involves selling Bitcoin futures and simultaneously purchasing Bitcoin ETF or spot Bitcoin. The strategy is a way to protect against price volatility, and take advantage of discrepancies in futures and spot prices.
JJ the Janitor is on Twitter (@JLabsJanitor). elaborated On the mechanics of the strategy. The PANDA Terminal charts are a visual representation of the behaviors. “When big boys want BTC spot filled they sell futures contracts to bring price into bids. When they’re filled + ready to let it rip they close those shorts, hence the inverse correlation on True Open Interest (OI).”
Sein remarks suggest that market manipulations are being used to blur the line between ethical and shrewd investment strategies. In his follow-up Tweet, “Market manipulation or savvy investment strategy….what’s the difference?” Question the ethics of the strategies used to challenge the narrative.
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Discussions about the discussion led to further examination by crypto enthusiasts. Sahra, a user of X, critiqued the implementation of carry trades, noting that, “Carry trade should suppress funding rates naturally. Long spot pressure against the perpetual should in theory cause perpetual rates to drop (all else being equal) as perpetual would begin to lag spot. Everything else makes sense, but these rates are far too low to justify a carry IMO.”
The comment highlights the complexity of carry trades. When expected results like reduced funding rates do not match market observations, it suggests that there are other factors influencing the markets.
Kingfisher acknowledged the anomaly in response to Sahra’s doubts: “That’s right, the funding remains fairly positive though. This suggests that while a carry trade could be in play, it’s not the dominant force in the market. Other factors, like bullish sentiment or other buying pressures, might be offsetting the expected downward pressure on funding rates from the carry trade.”
BTC is currently trading for $70,803.
Featured image created with DALL·E, chart from TradingView.com
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Source: www.newsbtc.com
