Can Bitcoin Spot ETFs keep price levels high?

Thought of the week

Last week, Bitcoin spot ETFs experienced large inflows on some days and significantly less on others. On the days when inflows were lower, the market experienced setbacks. This may indicate a correlation between inflows and the Bitcoin price, which means that only high inflows could lead to further price increases for Bitcoin.

Digital Asset News

US-domiciled “direct” bitcoin index funds (ETFs) saw one of their lowest net inflows of just $132 million on 14 March – the lowest in the last eight trading days and an 80% drop from 13 March.
Thursday’s decline was the second day in a row. On Wednesday, inflows already reached “only” USD 684 million, which corresponds to a decline of 38.3 % compared to 12 March. On Tuesday, meanwhile, a record-breaking inflow of USD 1.05 billion was recorded for a single day.
The shift in investor sentiment came amid a broader downturn in the crypto market as the price of Bitcoin fell below $69,000.
The impact of declining ETF inflows correlated with fluctuations in the BTC price. After a price rise on Wednesday 13 March, BTC temporarily set a new all-time high of over USD 73,000 before retreating on Thursday.
Market observers suspect that the current volatility, regulatory uncertainties and macroeconomic factors have made investors cautious again. The current downturn is also being attributed to next week’s FOMC meeting of the US Federal Reserve, which could shed light on the Fed’s plans with regard to possible interest rate cuts.

According to a JP Morgan analyst, Bitcoin has now overtaken gold in terms of volatility-adjusted allocation in investor portfolios.
Nikolaos Panigirtzoglou, Managing Director at JPMorgan, explained according to media reports that the share of Bitcoin (BTC) in investor portfolios is now 3.7 times higher than that of gold, taking volatility into account.
The analyst made particular reference to the significant inflows of more than USD 10 billion into Bitcoin exchange-traded funds (ETFs) since their approval in January, claiming that the potential size of the Bitcoin ETF market could reach a whopping USD 62 billion if gold is taken as a benchmark.
Another report from JPM Securities, in turn, predicts that the market for Bitcoin ETFs could grow to as much as $220bn in the next two to three years:
“We estimate that over the next three years, $220 billion of additional capital will flow into ETFs, which, given the multiplier on capital, could also impact the price of bitcoin.”

Bitcoin’s mining difficulty reached a new all-time high of 83.95 trillion hashes on 14 March.
The new Difficulty record was achieved on the same day that the Bitcoin price hit another new record high of USD 73,835, further fuelling positive investor sentiment ahead of the Bitcoin halving in April.
Mining Difficulty is a measure of how difficult it is to “mine” Bitcoin by solving cryptographic tasks, the difficulty of which increases or decreases depending on the number of miners in the network.
Bitcoin reaches a new difficulty high of 83.95 T. hashes, an increase of 5.8 % compared to the previous measurement of 79.35 T, on 29 February. It was achieved at a rate of 613.94 exahashes per second (EH/s), 1.96% more than the previous cycle of 602.14 EH/s.
The halving is the point in time at which the block reward for mining BTC is halved from 6.25 BTC to 3.125 BTC. The first halving took place on 28 November 2014, when the rewards were reduced from 50 to 25 BTC. The second halving took place on 9 July 2016, when the rewards were reduced from 25 to 12.5 BTC. The last halving took place on 11 May 2020, when the block rewards were reduced to 6.25.

Digital Asset Market

The majority of digital assets experienced moderate setbacks last week. Bitcoin was unable to confirm the $70,000 mark and all-time highs, leading to smaller sell-offs. A correlation to lower volume in the Bitcoin spot ETFs is visible, fuelling the assumption that these were “solely” responsible for the sharp price increase. Nevertheless, the inflows remain positive and put the market on a strong footing; some altcoins (Solana & Avax) illustrate that a rotation of capital makes sense if the narrative is right.
Over the week as a whole, the market is down around -4.9%.
The message for the coming week is: If Bitcoin radiates positivity, sold-off altcoins could ensure a strong performance!

Chart technology

From a chart perspective, Bitcoin is now within striking distance of its all-time highs, but has experienced a healthy cooling and consolidation. If the levels of ~$65,000 – ~$67,000 serve as support zones, further upswings can be expected in the coming weeks if the Bitcoin Halving attracts media attention.
If the Bitcoin spot ETF inflows normalise, there could also be a consolidation in Bitcoin, in which altcoins record strong cyclical gains. The first signs are already visible in some altcoins and are also noticeable due to the increased volume.

The next price targets in the event of a positive development: ~$70,000, ~$72,200, ~$75,000

The next price targets in case of negative development: ~$67,000, ~$65,500 ~$63,200

Trading idea

Momentum could be an important cornerstone this week. Altcoins in particular, which are experiencing significantly higher volumes, could be of interest and record strong short-term gains. Early positioning in these could ensure market outperformance.

Weekly overview

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