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Bitcoin ETF Inflows Fuel Price Recovery, Could Reverse 23% Retrace

Last Updated May 7, 2024 12:12 PM
Shraddha Sharma
Last Updated May 7, 2024 12:12 PM
Key Takeaways
  • ETF withdrawals led to substantial Bitcoin price retracements in the past weeks.
  • The Bitcoin ETF inflows turned positive for the first time on May 3.
  • The bull market retrace of 23% could recover after ETF withdrawals pause.

Bitcoin price fluctuated in April, with reports underlining that exchange-traded fund (ETF) withdrawals are a major reason for BTC price weakness. Withdrawals have exerted considerable pressure on Bitcoin’s valuation, leading to a notable 23% retraction—the most severe since the bear market bottom in 2022.

However, with a shift towards net inflows starting May 3, there’s renewed optimism that the market might be gearing up for a recovery.

Bitcoin Price Could Recover After Retrace

Since the bear market low in November 2022, Bitcoin has undergone several major retracements. Rekt Capital analysis finds that these retracements have varied both in duration and severity, with the most recent one in March through May 2024 being the deepest at -23.6% and lasting 49 days. 

 The data also indicates that retracements closer to -20% have often presented buying opportunities as they tend to precede a price rise. 

Bitcoin’s 21-day retrace in February 2023 stood at 23%, close to the current slump.

BTC ETF Withdrawals Pause

On May 3, the inflows into various Bitcoin ETFs turned positive for the first time. The total inflows touched $378.3m across multiple funds. FBTC observed $102.6m and BITB touched $33.5m, according to data  by Farside Investors.

IBIT and ARKB also saw significant increases of $12.7m and $28.1m, respectively. BlackRock’s IBIT witnessed zero flows between April 24 and April 30. IBIT experienced its first outflow of around $37m on May 1 when flows from all Bitcoin ETFs turned negative. After experiencing zero flows on May 2, the following day turned positive.

Grayscale has only experienced outflows since its January debut. Outflows of $167.4m came from GBTC alone at the start of May. However, GBTC recovered and experienced inflows of $63m and $3.9m on May 3 and May 6 respectively.

Continuing the trend for other ETFs on May 6, provisional data also saw healthy inflows totaling $217m. ARKB led the increase with $75.6m, closely followed by FBTC at $99.2m. IBIT, although lower than on May 3, still added $21.5m. Other ETFs like BTCO and BRRR had more modest gains, contributing to the overall positive investment climate within the Bitcoin ETF market.

Previously, ETF withdrawals contributed to the weakness in BTC price. CoinShares reported  on April 29 that over weeks, digital asset investment products saw net outflows of $435m, the largest since March 2024. The cumulative withdrawal of $161m on the day contributed to increased selling pressure when BTC dipped close to $57K. 

BTC Whales Accumulate

At the time of writing, Bitcoin’s price is trading above $64K, showing signs of recovery.

According to CoinGecko , over the past month, the price has decreased by 7% after a 122% rise over 2023. Parth Chaturvedi, Investment leads at CoinSwitch Ventures explained, “BTC as an asset class doesn’t trade in isolation and is affected by macroeconomic factors.”

Insights from CryptoQuant’s Ki Young Ju reveal that Bitcoin whales started accumulation during the price weakness, suggesting recovery in the coming days. 

Bitcoin Price Shows Some Recovery 

Bitcoin price is shaped by a combination of factors with ETF withdrawals major cause of the previous selling pressure. As Bitcoin ETFs witness a revival in inflows, Grayscale is also boosting recovery.

With ETFs playing a crucial role in Bitcoin’s price recovery, the ongoing accumulation by Bitcoin whales points to a likely upward trajectory in the near term. However, the market also remains at the mercy of broader macroeconomic factors, which continue to influence Bitcoin’s performance.

For the market to stabilize or potentially rise from the ‘deepest retrace‘, a rebound in demand and a continued increase in the flows from investment products is crucial.

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