Recent observations from Eric Balchunas, senior ETF analyst at Bloomberg, suggest that movements in Bitcoin’s price are influenced by factors beyond flows from spot Bitcoin exchange-traded funds (ETFs).
According to Balchunas, who shared his insights into X, “larger forces at work” shape the biggest cryptocurrency valuation. This indicates that the correlation between spot ETF flows and Bitcoin price action is less direct than some assume.
ETF influence and market movements
This analysis comes in the midst of a period of significant financial activity for Grayscale, which has seen substantial outflows, described by Balchunas as experiencing a “second wind” of outflows.
Yesterday, Grayscale reported outflows of $281.57 million, marking a notable reduction in its Bitcoin holdings by more than 40% since the inception of spot Bitcoin ETFs on January 11.
This scenario highlights a broader narrative Within the cryptocurrency investment sphere, where the relationship between ETF activities and Bitcoin market performance is complex and multifaceted.
Interestingly, the price of bitcoin still rose yesterday and fell in the second half of last week when Ten saw net inflows = there are other participants controlling this market. ETFs play a factor, but larger forces are at work here.
-Éric Balchunas (@EricBalchunas) March 21, 2024
Despite record outflows from Grayscale’s GBTC, Bitcoin market behavior has shown resilience. The cryptocurrency recently surpassed the $67,000 mark before experiencing a slight pullback, currently trading at a price of $66,106.
This movement coincides with comments from Federal Reserve Chairman Jerome Powell, which appeared to spur a rally in several risk assets, including cryptocurrencies.
Powell’s assurances regarding the outlook on rate cuts led to a slight recovery in the price of Bitcoin, demonstrating how external economic factors and sentiments can impact cryptocurrency markets. It is important to note that Bitcoin was trading below $65,000 prior to the announcement.
On-chain insights and future outlook for Bitcoin
Delving further into the analysis, Charles Edwards, a crypto analyst, recently suggested that pullbacks are common in Bitcoin bull runs, with corrections of around 30% within the realm of possibility.
A normal retracement of Bitcoin’s bull run is 30%. In December, we were already on the longest winning streak in Bitcoin history. A 20% pullback here takes us to $59,000. A 30% decline would be US$51,000. These are all levels we should be comfortable expecting as possibilities.
-Charles Edwards (@caprioleio) March 19, 2024
In related news, data from on-chain analytics platform CryptoQuant recently indicated a nearly 40% reduction in Bitcoin supply on exchanges over the past four years.
This trend points to a bullish sentiment Within the Bitcoin ecosystem, suggesting that investors are inclined to hold their assets in anticipation of future increases in value.
Additionally, CryptoQuant data reveals that demand for Bitcoin has consistently outstripped its supply since 2020, a trend that supports the asset’s value based on the premise that scarcity increases perceived value.
This dynamic is expected to intensify after the next Bitcoin halving event, which will reduce miners’ supply by half, potentially leading to further increases in the price of Bitcoin.
Featured image from Unsplash, chart from TradingView
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