Algos Tracking ETF Flows Drive Bitcoin Volatility in Asia

Trading Algos and Bitcoin Price

Recent Bitcoin price fluctuations in Asia have been heavily influenced by automated trading algorithms that track the flow of investments into US exchange-traded funds (ETFs). These algorithms react to daily ETF flow data, leading to significant price swings during Asian trading hours.

ETF Flows Impact Bitcoin Returns

The introduction of Bitcoin ETFs in the US has attracted billions of dollars in investments. Inflows into these ETFs have boosted Bitcoin prices, while outflows have contributed to declines. This pattern of flows has particularly impacted the Asian market, with strong returns in February and early March followed by a decline later in the month.

Algos and Derivatives

The influence of algorithmic trading extends beyond the spot market to derivatives. Liquidations of bullish crypto bets on Tuesday alone amounted to $357 million.

ETF Flows vs. Gold

Bitcoin’s sensitivity to ETF flows is more pronounced compared to gold. A larger proportion of Bitcoin is held in ETFs than gold, making ETF flows a more significant factor in Bitcoin’s price movements.

Market Response

Market participants note the market’s responsiveness to ETF flow data. The recent correction is seen as a natural pause after a period of excitement.

Spot ETF Flows

Yesterday, spot Bitcoin ETFs experienced a net inflow of $40.3 million, largely due to Blackrock’s significant contribution. ARK faced outflows, while Grayscale’s GBTC saw relatively low outflows.

Analyst Commentary

Analysts speculate that profit-taking after the first quarter and the US government’s sale of Bitcoin from the Silk Road may have contributed to the recent price decline.