Bitcoin ETF inflows depending on the situation

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first 5 days

The launch of a Bitcoin spot ETF was one for the history books. By all accounts, this was the largest ETF product launch in history, beating the previous record set by the launch of the Proshares Bitcoin Strategy ETF (BITO) in October 2021. First day trading volume was a whopping $4.6 billion and remained relatively strong compared to the typical post-launch declines for other products. Unlike inflows, you can be confident about volume figures. After the first two days of trading, the market was left wondering about the flow as the data provided by TradFi was delayed and incomplete. Experts like Eric Balchunas bloomberg, said it is normal for flow reporting to be delayed by T+3 (3 days later). Bitcoin is not used to this bad transparency.

The table below shows that GBTC outflows are now over $2 billion, with the largest day being day 3. However, the majority of day 3 flow is due to day 2 transactions, and it is very likely that day 2 will do the same. Day 1 and so on. We also don’t know if all publishers have the most up-to-date data. Is that all the flow or are the calculations not complete? We simply don’t know.

Bitcoiners are tracking on-chain flows to compensate for slow TradFi data, which can take days. Wednesday morning, James Van Straten cryptocurrency According to reports, 18,400 Bitcoins were transferred from Grayscale to Coinbase’s Prime OTC desk shortly after the market opened, following the outflow pattern of the previous two trading days: 9,000 Bitcoins on January 16th and 4,000 Bitcoins on January 12th. The on-chain data from the intelligence company Arkham is reliable, but the problem is that it does not match reported leaks. Three days of on-chain data added up to $1.3 billion worth of Bitcoin, with reported outflows of just $1.1 billion. And interestingly, there was no trading on the morning of January 18th, but it resumed this morning.

Source: Arkham via @DylanLeClair_

Coinbase already stores Grayscale’s bitcoin, so it can be transferred from its custody account to the OTC desk and picked up by other ETF market makers, limiting the impact on spot prices.

GBTC Selling May Close

A Grayscale sale was expected, but the final amount sold is not yet known until the situation calms down. Will the coins come out 100% slowly or only 10%? People are speculating that the 1.5% expense ratio compared to other ETFs, which average 0.25%, may lead people to swap the ETF. If so, it would not be interpreted as a net sale. GBTC lowered its conversion fee from 2% to the new 1.5%. If GBTC holders are enjoying significant unrealized profits, they may choose not to sell until the next rally. Remember that exchanges are also subject to tax.

Many early sellers of GBTC are doing so for ideological reasons. The discounts formed in February 2021 took them by surprise and they felt stagnant. The question is: how many bitcoins is that? GBTC holds over 550,000 bitcoins as of January 19, how many of those are still stuck? Why didn’t I already exchange it in the first few trading days? I think it’s less than people think. Yes, if you keep the expense ratio that high, eventually all your Bitcoin will come out. But it’s not one continuous movement. I think dumping will spread over several large rallies in a bull market. Sales at GBTC may have already slowed, with the discount to NAV falling from 150 bps on day one to 47 bps on January 17.

bitcoin price

Speaking of price, Bitcoin maintained the $40,000 support despite massive outflows due to GBTC and whale sales. James Van Straten reports that the whale that bought at $48,000 during the 2021 bull market has weathered the massive pullback and FTX fiasco, possibly unloading 100,000 BTC with a $49,000 demand. For context, all ETFs except GBTC are still below 79,000 BTC. This may not have been a news event, and the whale was simply sold to break even. This means that the ETF’s consistent buying pressure will only be delayed by a week or so.

We’re still in the range that goes back to early December, but right now we’re threatening to fall below that. My interest remains on the $40,000 and $44,193 lines that we have been watching all along, created from the daily highs of December 8th.

For readers with a beautiful low time preference, the monthly Ichimoku cloud is going strong. This is an extremely bullish signal that only occurs when a Bitcoin bull market begins. This last occurred in October 2020, after a near reversal pre-Covid in February 2020. Interestingly, if there had been a reversal in February, it would have been roughly in the same relationship as today’s halving. The only times this happened before 2020 was in June 2016, at the start of a major bull market, and a month before the July 2016 halving.

Pressure to purchase in bulk depending on the situation

Using the incomplete inflow data above, we can say that the average daily buying pressure, including GBTC selling, was over $200 million per day. Interestingly, day 4 was the second highest, adding some evidence to the theory that buying pressure could reach levels around $250-$300 million. To put that amount into context, Microstrategy began a four-month process of selling $216 million in new shares to buy more Bitcoin. ETFs do that in one day. Tether also continues to purchase Bitcoin with its reserves. They recently reported that they had added an additional $380 million in Bitcoin at the end of 2023. Two of the ETF’s first five days were better than that.

With all of these sources of massive demand in mind, take another look at the monthly chart above. There is only one path for this market. Are you ready?

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