April 3, 2024
Bitcoin's Asian Rollercoaster: Algos Monitoring ETF Flows Cause Market Fluctuations
Bitcoin ETF

Bitcoin’s Asian Rollercoaster: Algos Monitoring ETF Flows Cause Market Fluctuations

Investors in Bitcoin are facing significant swings in the Asian market, potentially influenced by automated trading protocols reacting to data on flows for US exchange-traded funds (ETFs) holding the cryptocurrency.

Automated Trading Algorithms React to ETF Flows Data

Daily figures reflecting demand for spot Bitcoin ETFs in the US disseminate across the cryptocurrency market during Asian trading hours, following the closure of US stock trading.

Notably, on Tuesday, Bitcoin experienced its most substantial drop in a month during the Asian morning, coinciding with data indicating investors were withdrawing funds.

Shiliang Tang, president of principal trading firm Arbelos Markets, highlighted the impact of algorithmic trading, stating, “From an algorithmic trading perspective, bots can auto-scrape this data and buy and sell based on this. It seems that’s basically what is happening.”

US Bitcoin ETFs’ Impact on Market Dynamics

Several US Bitcoin ETFs were launched on January 11, cumulatively attracting a net inflow of $12 billion thus far. Inflows peaked in the first half of March, correlating with Bitcoin’s surge to a record high of $73,798.

However, the sector has witnessed periods of outflows since then, contributing to Bitcoin’s 11% decline from its all-time peak.

Tang noted, “This flow pattern helps to explain why Asian-hours market returns were particularly strong in February and early March, but less so later in March.”

Derivatives Market Response and Importance of ETF Flows

As algorithmic protocols execute transactions in Bitcoin, they can impact the derivatives market. Coinglass data revealed approximately $354 million worth of bullish crypto wagers were liquidated on Tuesday, marking the highest figure in about two weeks.

Charlie Morris, Chief Investment Officer at ByteTree Asset Management, emphasized the significance of ETF flows for Bitcoin, stating, “ETF flows are, therefore, more important for Bitcoin than gold.”

Current Market Status and Factors at Play

Bitcoin faced a nearly 6% decline on Tuesday and continues to encounter challenges, dropping an additional 0.5% to trade at $65,400 as of 8:50 a.m.

Wednesday in Singapore. Diminishing expectations of Federal Reserve interest-rate cuts pose another obstacle for digital assets.

Despite recent setbacks, Bitcoin has surged approximately fourfold since the beginning of 2023, marking a recovery from a bear market.

Additionally, the forthcoming halving of new Bitcoin tokens this month, a quadrennial event, is viewed by some traders as supportive of prices.

Expert Insights and Market Sentiment

Jakob Kronbichler, co-founder of decentralized credit marketplace Clearpool Finance, highlighted the market’s response to ETF flow data, stating, “Typically markets have been taking the cue from the ETF flow number.

Also, there’s been a lot of excitement over the past couple of weeks, and the correction is natural for the market to take a bit of a breather.”

As Bitcoin investors navigate through volatile waters influenced by automated trading and ETF dynamics, expert analysis and market sentiment play a crucial role in shaping investor strategies amidst the ongoing market fluctuations.

Image: Wallpapers.com

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