Recent observations indicate a correlation between Bitcoin’s price fluctuations during Asian market hours and the flow of funds in US-based exchange-traded funds (ETFs). Expert analysis from Bloomberg attributes these erratic movements to automated trading algorithms that respond to the flow data of US ETFs, specifically during the times when Asia is active in trading.
Consequences of Algorithmic Trading
On a recent Tuesday morning, Bitcoin witnessed its most severe decline in a month, a shift that occurred simultaneously with the disclosure of US ETF flow data. Shiliang Tang, who leads Arbelos Markets, highlighted the significant role that algorithmic trading plays in these market shifts, insinuating that trading bots act on the available ETF data to execute trades.
Since the inauguration of various Bitcoin ETFs in the US earlier this year, there has been a noticeable withdrawal of $12 billion in net investments. This outflow came after a period of increased inflows in March which propelled Bitcoin to an all-time high of $73,777. What followed was a period of turbulence in the sector, with Bitcoin experiencing a price reduction of up to 17.6%.
Impact on Asian Markets and Beyond
The trading pattern tied to the US ETFs has notably influenced the performance outcomes in Asian markets. Despite the strong initial showing at the start of February and March, the markets later faced a downturn. Algorithmic trading impacts not just the spot market but also derivatives, with data from Coinglass indicating a liquidation of approximately $272 million in crypto holdings within a single day.
ETF Influence on Bitcoin Stability
Charlie Morris of ByteTree Asset Management emphasizes the growing importance of ETF flows for Bitcoin’s stability, especially when compared to gold. With a larger percentage of Bitcoin held in ETFs relative to gold, these flows are becoming increasingly crucial in dictating market behavior.
Points to Take into Account
- US ETF flow data seemingly triggers significant price movements in Bitcoin during Asian trading hours.
- Algorithmic trading bots that act on ETF data are directly influencing market volatility.
- Bitcoin ETFs in the US show a high sensitivity to investment inflows and outflows.
- The ETF-based trading pattern affects both the spot and derivative crypto markets.
- ETF holdings are a more significant factor for Bitcoin than for gold.
Market observers note the market’s current correction as a possibly incidental breather in the face of rampant enthusiasm, expecting the market to sustain its healthy progression. Although the first quarter’s end brought about peculiar activities with substantial outflows on Mondays, analysts speculate this might be strategies for closing the quarter on profitable terms. The imminent halving event, only 17 days away, adds another layer of anticipation to the market dynamics.