IntotheBlock’s latest comprehensive analysis of various factors affecting the Bitcoin market sheds light on the recent correction and potential future trends. One notable aspect under scrutiny is the fear, uncertainty, and doubt (FUD) surrounding the Grayscale Bitcoin ETF (GBTC).
Examining the broader picture, the decline of network fees for Bitcoin and Ethereum by over 30% is attributed to decreased market volatility, indicating reduced urgency among users transacting on these blockchains. On the exchange front, BTC witnessed a seventh consecutive week of net inflows into centralized exchanges (CEXs), primarily driven by GBTC’s deposits, albeit with a $100 million decrease compared to the previous week. In contrast, Ethereum experienced a notable outflow of $200 million from CEXs, a considerable reduction from the $460 million net outflows recorded in the preceding week.
Grayscale’s Role in Bitcoin’s Downtrend
The focal point of concern is the role of Grayscale, particularly its GBTC, in the ongoing BTC downtrend following the launch of spot ETFs. With GBTC undergoing a conversion into an ETF, significant outflows totaling $4.3 billion have been recorded, raising questions about the success of Bitcoin ETF launches. Notably, $1 billion of these outflows were from FTX, with CoinDesk suggesting that FTX opted not to sell its GBTC holdings during the conversion to the ETF.
Despite the substantial outflows from GBTC, aggregating $4.4 billion, it is highlighted that Bitcoin ETFs collectively received over $820 million in inflows. This net buying activity from Bitcoin ETFs and an increase in BTC holdings among whales—entities holding over 1,000 BTC—by approximately $3 billion (76,000 BTC) in 2024 suggests ongoing interest and investment from traditional finance players.
The report delves into the role of carry trade profits in influencing market dynamics, pointing out that hedge funds’ closing of carry trade positions in Q1 2024 might contribute to Bitcoin’s decline. Additionally, the termination of the bank term funding program (BTFP) is considered a factor impacting liquidity in the market.
However, signs of a potential slowdown in GBTC outflows and China’s central bank injecting $140 billion into its financial system raise questions about the trajectory of Bitcoin’s correction. The interplay of these factors makes it uncertain whether the correction is nearing its end or if other forces could continue to lower BTC prices.
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