March 27, 2024
Bitcoin Price Relationship with ETF Flows Weakens, JPMorgan Finds
Bitcoin ETF

Bitcoin Price Relationship with ETF Flows Weakens, JPMorgan Finds

In a notable divergence from previous trends, the price of Bitcoin (BTC) is exhibiting a decreased correlation with flows in and out of spot exchange-traded Funds (ETFs), according to analysis from JPMorgan. Analyst Ken Worthington highlighted this shift in a note to the bank’s clients, indicating that the correlation between Bitcoin’s price movements and ETF flows has declined significantly in recent weeks.

On Wednesday, Worthington noted that the correlation between Bitcoin’s price and ETF flows dropped to 0.60, down from 0.78 on February 7th. This marks a notable decrease from the high correlation observed on January 31st, which stood at 0.84. Worthington explained that a correlation value above 0.70 is typically considered “highly correlated,” while anything just below would be classified as “moderately correlated.”

The surge in inflows into spot ETFs has been a significant development in the cryptocurrency market. Last week, investors poured a record-breaking $2.4 billion into these funds, marking the largest influx of capital in their relatively short history. Notably, BlackRock’s IBIT and Fidelity’s FBTC have emerged as dominant players in this space, accumulating nearly $11 billion in assets under management (AUM) thus far.

Analysts suggest that, for the time being, there appears to be a correlation between ETF flows and Bitcoin’s price movements. The sharp gains experienced by Bitcoin in early February coincided with a notable increase in capital inflows into the ETFs. However, the recent stabilization in Bitcoin’s price over the past few sessions may have prompted softer inflows into these funds.

This decoupling between Bitcoin’s price and ETF flows underscores the evolving dynamics within the cryptocurrency market. While ETFs have historically been viewed as indicators of investor sentiment and demand for Bitcoin exposure, their influence on price movements appears to be waning in the current market landscape.

As Bitcoin continues to mature as an asset class, investors and analysts will likely closely monitor the relationship between spot ETF flows and price movements to gain insights into market dynamics and investor behaviour. The evolving correlation between these factors could have significant implications for the future trajectory of Bitcoin and the broader cryptocurrency market.

Image by Nick Bastian on Flickr

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