Why is Bitcoin stagnating despite $2 billion in spot ETF inflows?
Bitcoin (BTC) fell 6.7% after nearly reaching $72,000 on May 21 before settling at $67,100. This decline does not necessarily indicate a bearish trend, as Bitcoin is still 8.7% below its all-time high. But investors are wondering why recent inflows into Bitcoin spot exchange-traded funds (ETFs) have not sparked more bullish sentiment.
Asset distribution based on failed Mt. Gox exchange assets
Data from Farside Investors shows net inflows of $1.96 billion into U.S. spot Bitcoin ETFs since May 15. This corresponds to 64 days of BTC issuance from miners. In particular, the U.S. spot Bitcoin ETF market currently has over $50 billion in assets under management. By comparison, U.S. gold ETFs hold about $118.5 billion, according to the World Gold Council.
Moreover, inflows into spot Bitcoin ETFs typically trigger a withdrawal of Bitcoin from exchanges, which fell to 2.3 million BTC, its lowest level since March 2018, according to Glassnode data.
There is no certainty that these coins will be sold in the near future, but transfers to cold storage and custodians outside of exchanges generally reduce market liquidity. This problem is even more pronounced in bull markets. This means that aggressive buying can amplify price movements due to low order volumes at high price levels.
As a result, if the price continues to fall even as institutional investors continue to acquire Bitcoin through ETFs, the selling pressure will likely come from the general spot market. The move of 141,686 BTC by bankrupt Japanese exchange Mt. Gox on May 28 suggests that an asset distribution to creditors is imminent ahead of the scheduled October 31 deadline.
$9.4 billion worth of Bitcoin has been waiting for more than a decade to arrive at Mt. Gox owes money to about 127,000 of his creditors. Despite the short-term negative impact on the price of Bitcoin, intergovernmental blockchain expert Anndy Lian believes that repaying this debt will resolve long-standing problems and permanently remove associated uncertainty.
Regulatory uncertainty and anti-cryptocurrency lobbying
One of the reasons Bitcoin holders have been cashing out more than $67,000 is regulatory uncertainty in the United States. The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission have taken legal action against major exchanges and brokerages, including Binance, Coinbase, Kraken, KuCoin, and Robinhood.
The U.S. Department of Justice also indicted the co-founder of Tornado Cash and the developer of Samourai Wallet on money laundering charges, and indicted Roger “Bitcoin Jesus” Ver on tax evasion and fraud charges seven years ago. Although these events do not directly affect Bitcoin, they tarnish the industry’s image, making it less attractive to institutional investors.
Related: 3 Solid Bitcoin Indicators Predicting BTC Price Rising to $75,000 in June
This problem extends beyond the United States. For example, the Hong Kong Securities and Futures Commission issued an ultimatum to cryptocurrency exchanges that have not yet registered to operate in the territory. As of May 31, only 18 exchanges had applied for licenses, with major players such as OKX, Huobi, and Gate pulling out due to the strict regulatory requirements imposed by Hong Kong.
In addition to the ongoing legal challenges and Wells notice, there is ongoing political backlash against cryptocurrencies. On May 29, U.S. Senators Elizabeth Warren and William Cassidy sent a letter to the Drug Enforcement Administration saying that cryptocurrencies are “playing an increasingly important role” in fentanyl trafficking. claimed. Senator Warren has previously been criticized for using unreliable data in her discussions about terrorism.
Potential implications for cryptocurrency intermediaries and Mt. These factors, along with the potential for selling pressure from the Gox Coin distribution, do not place Bitcoin’s final upper limit at $70,000 or similar. It remains to be seen whether cash ETF investors will maintain their positions as U.S. debt continues to rise. For now, the market appears to be under bearish control in the near term.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
