Illustrative image | source: CoinBank https://coinbank.cz/portal-o-kryptomenach
The second largest since the fall until then FTX crypto exchange a year and a half has already passed (November 2022). This crash very significantly negatively spilled over into a period of losses across the entire market. It is not for nothing that the period at that time is referred to as the period of cryptowinter, when the price of Bitcoin fell even below the level of 16,000 dollars after this crash. The whole case surrounding the FTX crash was closed at the end of March this year, when the founder of the crypto exchange, Sam Bankman‑Fried convicted for 25 years for his part in the collapse of FTX.
Demand for ETFs was rising
However, many months have passed since then, and Bitcoin, along with the entire market, has managed to recover from this shock. The January approval of 11 spot exchange-traded funds (ETFs) with bitcoins significantly helped him in this. And while the launch of these funds caused literally madness after these new investment products, April, on the contrary, was carried in a spirit of resignation. In less than January, ETFs were able to attract new capital in the amount of 4.6 billion dollars, which is many times more than even the most optimists expected. What’s more, the inflow of new capital continued even in the coming months, February and March.
A net inflow of $4.6 billion during March 2024 even pushed the value of Bitcoin to its all-time record just below $74,000 ($73798.25). However, in April, money flows into ETFs stalled and this immediately had a negative effect on the exchange rate of the oldest and most valuable cryptocurrency. The waning of bitcoin ETF euphoria resulted in the worst month since the FTX crash, with bitcoin down nearly 16%. That’s just a hair short of the decline seen in November 2022.
Weakening demand for spot bitcoin ETFs isn’t the only culprit behind bitcoin’s slide. But it is the more dominant factor. The FED also left its ominous signature on the fall in the value of Bitcoin, which left interest rates unchanged, but its role is only marginal. However, it cannot be left completely unnoticed that the slowdown in the release of the American economy negatively prescribes to risky investments, which at such times give up their positions for secured and safe harbors.
ETFs set the game
However, if we take a closer look at the development of cash flows to and from ETFs, we find a correlation with the development of the Bitcoin exchange rate. The value of Bitcoin was not affected by the much expected the so-called halving. The quadrennial event, which reduces the supply of new coins in the market and has acted as a tailwind for the price in the past, had minimal impact this time around. But its importance grows over time, and it can be assumed that it will be so in this case as well.
On the other hand, Bitcoin fell on days when the reallocation of capital from ETFs to other products outpaced the inflow of new capital into funds. The market experienced a shock 24/04/2024when not a single dollar flowed into the BlackRock-managed IBIT fund after a 71-day session.
Overview of daily capital inflows and outflows into and out of Bitcoin ETFs vs Bitcoin Value chart (edited by author) | source: Farside https://farside.co.uk/?p=997 and CoinBank Trader https://trader.coinbank.cz/mena/Bitcoin
Since that day, we have witnessed only net outflows of capital, which culminated on 1/5/2024 with a cumulative outflow of more than half a billion dollars($563.7 billion) from these funds. The same day also saw the first-ever net outflow of capital from the IBIT fund ($36.9 billion), the hegemon among spot bitcoin ETFs. Although this is not such a significant outflow of capital compared to other funds, it was a big surprise for the cryptocurrency market. This was exacerbated by the diversion of capital from other ETFs as well, which pushed the bitcoin rate below the $57,000 level.
Hope does not come from Asia
Investors looked forward to the last day of April with hope hong kong stock exchange listed 6 titles offering investments in bitcoin spot ETFs. But those who expected a new impetus for the cryptocurrency market were disappointed. No new wind came from Asia, and one could even say that the launch of spot ETFs with bitcoins on the stock exchange there ended in failure. The debut on Tuesday (April 30, 2024) did not gain the confidence of investors for the whole day and recorded a total volume of trades of only 11 million dollars.
The information contained in this article does not serve as investment advice. They are for informational purposes only.
Ing. Zbyněk Kalousek
He studied economics and management at the Masaryk University in Brno. In the past, he was engaged in the analysis of financial markets. He returns to this activity after a short pause. Co-founder of a company that deals with consulting and accredited education. He cooperates with several other companies. He perceives the world of cryptocurrencies as a progressive part of the market, which offers a lot of opportunities, but at the same time presents a lot of pitfalls, from decentralization, an apolitical approach, to high volatility of exchange rates, to the increasingly difficult mining of cryptocurrencies.
CoinBank
Since 2021, it has been working with MipSoftware, which operates the CoinBank cryptocurrency exchange and the CoinBank Trader cryptocurrency exchange. Both platforms are particularly interesting for Central European clientele. Through its product, it connects end users with the world’s largest crypto exchanges and offers a pleasant user experience. For a Czech client, trading using Czech currency is probably the most pleasant function. A wide range of cryptocurrencies, access to the world’s largest exchanges, these are prerequisites for interesting cooperation.
More information at https://coinbank.cz/.
