Bitcoin (BTC) saw a 6.7% decrease in value, falling from nearly $72,000 to $67,100 on May 21. However, this decline does not necessarily indicate a bearish trend, as Bitcoin is still only 8.7% below its all-time high. Nevertheless, investors are puzzled as to why the recent inflows into Bitcoin spot exchange-traded funds (ETFs) have not sparked more bullish sentiment.
According to data from Farside Investors, there have been $1.96 billion in net inflows into U.S. spot Bitcoin ETFs since May 15, which is equivalent to 64 days of BTC issuance from miners. Notably, the U.S. spot Bitcoin ETF market now has over $50 billion in assets under management. In comparison, U.S. gold ETFs hold about $118.5 billion, according to the World Gold Council.
Additionally, inflows into spot Bitcoin ETFs typically result in the withdrawal of Bitcoins from exchanges. As per Glassnode data, this withdrawal has reached its lowest level since March 2018, with only 2.3 million BTC being withdrawn.
Although it is uncertain whether these coins will be sold in the near term, the transfer of Bitcoins to cold storage and custodians outside of exchanges usually reduces market liquidity. This becomes more pronounced in bull markets, where thinner order books can amplify price movements due to aggressive buying at higher price levels.
Therefore, if institutional investors continue to acquire Bitcoin through ETFs while the price continues to fall, it is likely that selling pressure is originating from the regular spot markets. The movement of 141,686 BTC by the bankrupt Japanese exchange Mt. Gox on May 28 is seen as an indication of an imminent asset distribution to its creditors before the scheduled deadline on October 31.
Mt. Gox owes over $9.4 billion worth of Bitcoin to approximately 127,000 creditors who have been waiting for over a decade since the exchange’s collapse in 2014. Despite the short-term negative impact on Bitcoin’s price, blockchain expert Anndy Lian believes that repaying this debt will resolve a longstanding issue and permanently remove associated uncertainty.
One of the reasons Bitcoin holders are cashing out above $67,000 is the regulatory uncertainty in the United States. The SEC and Commodity Futures Trading Commission have taken legal actions against leading exchanges and intermediaries, while the Department of Justice has levied charges against individuals involved in money laundering and tax evasion.
This regulatory uncertainty extends beyond the U.S., with Hong Kong’s Securities and Futures Commission issuing an ultimatum to cryptocurrency exchanges that have not yet registered to operate in the area. Additionally, there is a persistent political backlash against cryptocurrencies, with U.S. Senators Elizabeth Warren and William Cassidy claiming that cryptocurrencies have played a role in the fentanyl trade.
Considering these factors, along with the potential impact on cryptocurrency intermediaries and the possible selling pressure from the distribution of Mt. Gox coins, there is no definitive upper limit for Bitcoin’s price. It remains to be seen whether spot ETF investors will maintain their positions as U.S. debt continues to rise. Currently, the market appears to be under bearish control in the short term.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.