Home / News / Crypto / ETF / Bitcoin ETF Outflows and Inflows Don’t Influence BTC Price Directly, Whales Do
4 min read

Bitcoin ETF Outflows and Inflows Don’t Influence BTC Price Directly, Whales Do

Published June 12, 2024 12:00 PM
Giuseppe Ciccomascolo
Published June 12, 2024 12:00 PM

Key Takeaways

  • The recent Bitcoin ETF movements indicate they don’t directly impact the BTC price. 
  • On the other hand, whales investments seem to have a direct influence on the crypto price. 
  • But things may change in the future as more people pour money into ETFs.

Bitcoin’s price decreased below $70,000 and, while short-term jitters are evident, long-term investors seem unfazed, continuing to accumulate.

But a curious question arises: if new investors are buying, why does the price drop? It’s not all exchange-traded funds (ETFs) fault, as whales play a pivotal role in this case. However, this scenario may change soon.

ETFs Movements Don’t Impact BTC Price

Bitcoin prices took a tumble, dipping below $70,000 and sparking a correction across the cryptocurrency market. However, despite the short-term chill, there are signs that investors are still accumulating  Bitcoin for the long haul. This selling wave seems to be driven by newer market participants, while seasoned hodlers are clinging to their coins.

Interesting insights from Bitcoin influencer WhalePanda  suggest a correlation between the recent dip and outflows from certain established ETFs. Here’s the wrinkle: most of these ETFs store their Bitcoin with Coinbase Custody, and only a fraction of these wallets are publicly viewable.

Bitcoin ETF flow table
Bitcoin ETF flow table. l Source: Farside Investors

Additionally, even previously known addresses linked to the Fidelity Bitcoin ETF have been emptied, with the funds mysteriously transferred to a network of new wallets. While it’s unclear if these ETF-linked wallets directly caused the selling frenzy, the question remains:

Why don’t ETF inflows and outflows directly impact Bitcoin’s price? The answer lies in how these ETFs currently operate. Their trades rely on liquidity provided by over-the-counter (OTC) desks, which essentially act as intermediaries between buyers and sellers, buffering the direct impact on the broader market.

Why Whales Investments Influence The Market

If investments into ETFs don’t significantly affect the Bitcoin price, then what does? The answer lies with the whales.

Whale activity serves as a barometer of large-scale investor involvement in the market. A high ratio indicates substantial transactions by these major players. Recently, the whale activity ratio has shown a consistent upward trajectory, signaling increased transaction volumes by significant investors.

The downturns correspond to periods of heightened whale activity. This implies that large players are offloading their holdings, leading to price decreases. Presently, the whale activity ratio remains elevated, exerting continuous downward pressure on prices. Essentially, even if whales aren’t executing major sell-offs, their significant holdings impede price surges.

It’s imperative to approach this situation with caution. Monitoring the movements of large investors can aid in forecasting price fluctuations. Particularly during periods of heightened whale activity, it’s wise to brace for abrupt price plunges.

Whales wield considerable influence over the Bitcoin market. Observing their activities can enhance our understanding of the market dynamics and enable us to make more informed investment choices.

Things May Change In The Future

Raoul Pal, CEO of Real Vision, recently shared insights  on X, highlighting that the majority of ETF flows are driven by arbitrageurs rather than retail investors.

Pal asserted his understanding of these firms’ flows, emphasizing that they primarily engage in arbitrage, rather than taking directional risks. This entails seizing short-term opportunities by capitalizing on disparities between the net asset value of the spot Bitcoin ETF and the price of Bitcoin itself.

However, in the long run, if OTC desks fail to keep up with the demand for purchases, ETFs may resort to sourcing from exchanges, potentially impacting Bitcoin prices.

Moreover, the introduction of ETFs has prompted increased recommendations from institutions to their clients. Financial advisers are anticipated to endorse this product, with Fidelity already allocating 1-3% of their model portfolios to the ETF. Additionally, Morgan Stanley has made the decision to empower 15,000 brokers to recommend Bitcoin ETFs to customers, further amplifying its influence.

Was this Article helpful? Yes No