During the first week of its launch, Bitcoin exchange-traded funds (ETFs) experienced a significant net outflow of $888 million. This is a stark contrast to the previous week, which saw an inflow of $2.57 billion. Many are now questioning the sustainability of Bitcoin’s recent rally to $70,000 on March 25.
Some market participants believe that institutional inflows were the driving force behind Bitcoin’s all-time high of $73,755 on March 14. They are skeptical of the 9% gains seen between March 23 and March 25, especially considering that the S&P 500 index failed to maintain its all-time high.
Analyst venturefoundΞr suggested that Bitcoin was facing a reality check after the hype from ETF investors pushed it to new heights before the halving event. While a 15% gain from March 20 to March 25 doesn’t completely dismiss bearish concerns, Bitcoin’s market behavior indicates that its bullish momentum is not solely dependent on spot ETF inflows.
Some traders believe that the recent approval of a $1.2 trillion spending package by the United States on March 23 is a positive catalyst for Bitcoin. This is particularly significant considering the U.S. Federal Reserve’s forecast of three interest rate cuts throughout 2024. With the U.S. deficit projected to reach $1.6 trillion in 2024 and interest rates above 5.25%, the pressure to repay government debt intensifies.
The simultaneous rise of scarce assets like gold, Bitcoin, real estate, and the stock market suggests a weakening U.S. dollar. Investors are seeking refuge from fiat currency devaluation, making the performance of the U.S. dollar against the euro and the British pound less relevant.
While it may seem premature to conclude that Bitcoin’s price will continue to rise due to monetary expansion, it’s important to note that its price has already surged 64% year-to-date in 2024. Bears who argue that the U.S. fiscal trajectory will lead to a recession, negatively impacting risk-on assets, overlook this significant growth.
To assess whether professional traders have become more pessimistic about Bitcoin following the outflow of spot ETFs, it’s crucial to examine the BTC monthly futures contracts. Currently, the annualized BTC futures premium remains largely unaffected by the net outflows, indicating a willingness among buyers to pay a premium for leveraged long positions.
Looking at the Bitcoin options market is also important to gauge the demand for strategies to hedge against potential price corrections. The BTC options 25% delta skew has remained in a neutral range since March 13, suggesting a balanced demand for bullish and bearish options strategies. There were no signs of panic as Bitcoin tested the $62,000 support on March 20.
Despite the recent outflows from spot ETFs, the indicators from Bitcoin derivatives markets indicate strong price resilience. This supports the idea that the $70,000 support level is gaining strength.
It’s important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.