The First 5 Days: Analyzing the Bitcoin ETF Launch

Traditional Market Data Indicates Slow and Incomplete Information, but Bitcoin ETFs Report Inflows of $200M Per Day. Converging Demand Expected to Drive Price Increase.

Understanding the Significance of Bitcoin ETF Inflows

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It’s been an eventful few days in the world of Bitcoin. The launch of the Bitcoin spot ETF has made headlines, breaking records and stirring up speculation about the future of the market. But what does it all mean? Let’s dive in and take a closer look.

Unveiling the Numbers

The launch of the Bitcoin spot ETF has been nothing short of historic. With a trading volume of $4.6 billion on its first day, it surpassed the previous record set by the Proshares Bitcoin Strategy ETF launch. This is certainly an impressive feat, but there’s more to the story.

While the trading volume numbers are reliable, the same can’t be said for the inflows. The data provided by traditional finance (TradFi) sources was delayed and incomplete, leaving the market in the dark. Experts have pointed out that such delays in reporting are common and can last up to three days after trading (T+3). This lack of transparency is unfamiliar territory for Bitcoin.

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As we examine the data, we can see that GBTC outflows have exceeded $2 billion, with the highest outflow occurring on Day 3. However, it’s important to note that the outflows on each day might be the result of trading that took place on the previous day. Additionally, we can’t be certain if all the issuers have provided up-to-date data. Are there more flows that haven’t been accounted for? The answer remains uncertain.

On-Chain Insights

In response to the slow and incomplete TradFi data, Bitcoin enthusiasts have turned to on-chain analysis. By tracking on-chain flows, we can get a clearer picture of what’s happening. According to intelligence firm Arkham, 18,400 bitcoins were sent from Grayscale to Coinbase’s Prime OTC desk right at the market open. This follows a pattern of outflows on the two previous trading days. 🚀

The on-chain data from Arkham is trustworthy, but it doesn’t match the reported outflows. In those three days, the on-chain data shows a total of $1.3 billion worth of bitcoin, while the reported outflows were only $1.1 billion. Additionally, there were no transactions on the morning of January 18, but they resumed the following day. 📈

It’s worth noting that Coinbase already custodies Grayscale’s bitcoin, so these transfers are from their custody account to the OTC desk, where other ETF market makers can access them. This strategy helps limit the impact on the spot price.

Is GBTC Selling Coming to an End?

With the launch of the Bitcoin spot ETF, it’s no surprise that Grayscale is selling its holdings. However, the ultimate amount that will be sold remains unknown. Will they sell all their coins or just a fraction? Some speculate that the expense ratio of 1.5% compared to other ETFs’ average of 0.25% might incentivize people to switch to other ETFs without causing net selling.

It’s important to consider that GBTC lowered its fee when it converted, from 2% down to the new 1.5%. Those holding GBTC may choose not to sell until the next rally if they have significant unrealized gains. Swapping ETFs also involves tax implications. 💼

While many early GBTC sellers have ideological reasons for selling, it’s unclear how many bitcoins are still held by them. GBTC still holds over 550,000 bitcoins as of January 19. Why haven’t they swapped out already? It’s likely that fewer bitcoins are still “stuck” than people think. Although GBTC will eventually sell all their bitcoins in smaller movements, the mass dumping is expected to occur during several large rallies in the bull market. The discount to NAV has also decreased from 150 bps on day 1 to 47 bps on January 17, suggesting that GBTC selling may already be slowing down. 🐢

Bitcoin Price and Future Outlook

Despite the massive outflows from GBTC and whale selling, Bitcoin has managed to hold support at $40,000. A whale who bought at $48,000 during the last bull market recently sold 100,000 BTC with an ask price of $49,000. The ETFs, excluding GBTC, currently hold 79,000 BTC, signaling strong buying pressure. This market is far from a sell-the-news event, and the consistent buying pressure is only slightly delayed.

Looking at the price chart, we’re still within the range that has held since early December. However, there is a risk of falling below this range. In terms of technical analysis, it’s crucial to pay attention to the $40,000 support level and the $44,193 line, which has been significant since December 8.

On a more exciting note, the monthly Ichimoku cloud is flipping bullish. This signal has historically marked the beginning of bull runs in Bitcoin, as we’ve seen in October 2020 and June 2016. It’s worth noting that in February 2020, the cloud almost flipped prior to the COVID bear market, and now, we’re approaching the same relation to the halving as we were in June 2016, one month before the massive bull market. These trends suggest that Bitcoin is heading towards new heights! 🌈

Massive Buying Pressure in Context

Considering the incomplete data on inflows, the average daily buying pressure, including GBTC selling, has exceeded $200 million. Day 4 saw the second-highest buying pressure, hinting that it might level out around the $250-300 million mark. To put this into perspective, it took Microstrategy four months to sell $216 million in new shares to buy more Bitcoin, while the ETFs achieve a similar feat in just one day. Additionally, Tether continues to purchase Bitcoin for their reserves. They recently added $380 million in Bitcoin at the end of 2023. Clearly, there is tremendous demand in the market, indicating a bullish trajectory for Bitcoin.

Final Thoughts and Interactions

With all the buying pressure from various sources and the positive technical signals, it’s hard to ignore the potential for Bitcoin’s future growth. Are you ready for what’s to come? Join the conversation and share your thoughts on social media! And don’t forget to like and share this article to spread the knowledge. 🌟

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Q&A: Addressing Additional Topics on Bitcoin ETF and Future Trends

Q1. How does the launch of the Bitcoin spot ETF compare to other ETF launches in history?

A1. The launch of the Bitcoin spot ETF has been the largest in history, surpassing the previous record set by the Proshares Bitcoin Strategy ETF launch in October 2021. The first-day trading volume reached an impressive $4.6 billion. This indicates significant interest in Bitcoin and marks a milestone in the mainstream adoption of cryptocurrencies.

Q2. How do on-chain insights provide a more accurate understanding of Bitcoin flows compared to traditional finance data?

A2. On-chain analysis tracks the actual movement of bitcoins on the blockchain, providing real-time and transparent data. Traditional finance data, on the other hand, can be delayed and incomplete, making it challenging to gauge the true state of Bitcoin flows. By relying on on-chain insights, we can get a clearer and more immediate picture of what’s happening in the market.

Q3. What factors might influence GBTC holders in deciding whether to sell or hold their Bitcoin?

A3. GBTC holders have various considerations when deciding whether to sell or hold their Bitcoin. Some of these factors include unrealized gains, tax implications, the expense ratio of 1.5%, and the potential for future rallies. Swapping ETFs involves tax considerations, and holders may choose to wait for the next rally to maximize their gains. Furthermore, the high expense ratio might incentivize holders to explore other ETF options instead of selling their shares.

Q4. What is the significance of the bullish signal from the monthly Ichimoku cloud?

A4. The flipping of the monthly Ichimoku cloud to a bullish signal is highly significant in the world of technical analysis. Historically, this signal has marked the beginning of bull runs in Bitcoin. By indicating a shift in the long-term trend, the bullish cloud provides optimism for the future growth of Bitcoin. Observing this signal in the current market context is a positive and encouraging sign for Bitcoin investors.

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Reference List:

1. Bitcoin Magazine Pro – Subscribe Now
2. Bitcoin Magazine – Bitcoin Rebounds with $44K Spot as BTC ETF Approval Looks Increasingly Likely
3. James Van Straten’s Twitter – Flows Sent from Grayscale to Coinbase
4. Arkham’s Twitter – On-Chain Bitcoin Outflows Data
5. Blocking.net – Tether Adds $380 Million in Bitcoin to Reserves
6. Bitcoin Magazine – The Past, Present, and Future of Bitcoin ETFs
7. Bitcoin Magazine – Bitcoin Price and Technical Analysis
8. Bitcoin Magazine – Bitcoin ETF Launches to Stellar Trading Volume

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