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Anthony Pompliano Highlights Bitcoin Price Surge: ETF Demand Outpaces Supply

Published February 28, 2024 12:00 PM
Teuta Franjkovic
Published February 28, 2024 12:00 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Bitcoin price jumps significantly without a clear catalyst.
  • Market watchers point to Bitcoin ETFs and potential inflation concerns as potential drivers.
  • Anthony Pompliano emphasizes the supply-demand imbalance caused by Bitcoin ETF inflows.
  • He cites a 10x difference between net ETF inflows and daily Bitcoin production.

Bitcoin recently experienced a significant surge, with its value soaring over almost 5% in the last 24 hours alone.

Such a remarkable price increase is uncommon in the financial markets, particularly without any clear catalysts.

Bitcoin Soars Unexplained, Highlighting Crypto Market Volatility

This unexpected jump has caught the attention of investors and market watchers alike, highlighting the market’s unpredictable nature.

Despite the lack of an immediate, identifiable reason for this spike, the movement underscores the factors driving the crypto sector. Here, sentiment and speculative interest can lead to rapid price changes.

Crypto investor Anthony Pompliano said  Bitcoin’s rapid appreciation over the recent weeks can be attributed to several factors. These, he claimed, reflected the complex interplay of market dynamics, investor sentiment, and macroeconomic influences.

  • Institutional Adoption: Increased adoption by institutional investors and large corporations, viewing Bitcoin as a hedge against inflation and a digital store of value, has boosted confidence and demand.
  • Bitcoin ETFs and Financial Products: The introduction and approval of Bitcoin ETFs (Exchange-Traded Funds) and other financial products have provided easier access for traditional investors, enhancing liquidity and market participation.
  • Economic Indicators: Concerns over inflation, currency devaluation, and the search for non-correlated assets in uncertain economic times have led investors to consider Bitcoin as an alternative investment.
  • Technological Developments: Ongoing improvements and updates within the Bitcoin network, such as the Taproot upgrade, enhance its functionality and efficiency, attracting more users and investors.
  • Market Sentiment: Positive news, social media hype, and endorsements from high-profile individuals and companies can lead to speculative buying sprees, driving up prices.
  • Global Financial Policies: Loose monetary policies by central banks around the world, including low interest rates and quantitative easing, have pushed investors towards riskier assets like Bitcoin in search of higher returns.

He said :

“The common answer is that the bitcoin spot ETFs have led to significant demand for the asset. This answer is not wrong. Yesterday we saw $520 million in net inflows to the ETFs.”

Bitcoin ETFs Drive Supply Imbalance 45 Days Post-Launch

Pompliano also mentioned  BitMEX Research  that highlighted a staggering fact. The data found that the net inflow of capital into Bitcoin equates to 9,510 Bitcoins. This figure figure that dwarfs the daily production of the Bitcoin network, which stands at 900 new Bitcoins per day.

This indicates that demand for Bitcoin is exceeding its supply by more than tenfold.

While such a supply-demand imbalance might have been expected in the initial days following the launch of Bitcoin ETFs, the continuation of this trend 45 days after the ETFs’ introduction is astonishing, underscoring the intense and sustained interest in Bitcoin investment.

Analyzing Historic ETF Inflows and Inflation Fears

Bitcoin spot ETFs have seen a historic influx, surpassing $6 billion in cumulative net inflows since their inception. Leading the charge, Blackrock’s fund boasts $7.2 billion in assets, with five ETFs each holding at least $1 billion in Assets Under Management (AUM). This monumental achievement marks the Bitcoin spot ETFs as the most successful ETF launch in history by nearly every metric.

Pompliano raises a crucial question – Why is there such a fervent rush to buy Bitcoin now?

While the straightforward answer might suggest institutions are simply seizing the opportunity to invest in a top-performing asset, Pompliano believes this doesn’t fully capture the essence of the current trend.

He hints at a more profound reason behind the mass adoption of Bitcoin. Pompliano suggested it might be linked to anticipations of an inflation resurgence. Investors, wary of inflation’s potential impact on their portfolios, may be turning to Bitcoin as a safeguard against the looming threat, a perspective that could redefine the narrative around Bitcoin’s recent popularity surge.

Inflation Fears and Bitcoin’s Role as a Hedge

Pompliano revisited 2020, when the pandemic  severely impacted the economy. This prompted government and central banks to inject trillions in monetary and fiscal stimulus into the market.

Despite official assurances downplaying inflation concerns and later claims of inflation being “transitory,” seasoned investors like Paul Tudor Jones and Stanley Druckenmiller publicly warned  of impending inflation on CNBC. Not only that, but they also advocated for Bitcoin for inflation hedging.

This foresight proved accurate as Bitcoin’s value skyrocketed  from around $8,000 in the summer of 2020, when inflation was below 2%, to $64,000 by March 2021β€”an eightfold increase. This surge was largely attributed to the market’s ability to anticipate future trends, with investors purchasing Bitcoin aggressively to shield themselves from the anticipated inflation.

Pompliano suggests  this move is happening again, despite the Federal Reserve’s efforts  to curb inflation and media reports of declining year-over-year CPI. Echoing insights from @WinfieldSmart , he highlights the risk of inflation’s return, noting the sharp increase in ISM services prices as a reliable indicator for future inflation.

Beyond ETF Inflows and Wall Street’s Role

Pompliano points out that while Bitcoin ETFs are currently in the spotlight due to their measurable capital inflows and performance beyond expectations, there’s more to the story than just Wall Street’s influence driving up Bitcoin prices to prompt sales.

He warns against simplifying the rally to mere speculative interest from large investors. Pompliano highlighted the substantial risk of inflation hidden within the economy. He pointed that seasoned investors recognize the signs and won’t the market should not surprise them again.

Pompliano summed up the situation with a list of contributing factors. He claimed inflation, ETFs, media focus, liquidated shorts, and reflexivity were all playing their part. He also suggested the current scenario was aligning perfectly with Satoshi Nakamoto’s original vision  for Bitcoin.

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