Bitcoin Faces Volatile Swings in Asia amid Automated Trading Fallout from US ETF Flows

Bitcoin traders in Asia faced increased price volatility, possibly caused by automated trading bots reacting to information about US-listed cryptocurrency ETFs, Bloomberg reported. The core problem is the time gap: data on investor interest in spot Bitcoin ETFs is made public in Asia after the US markets have closed.

Asian traders have the advantage of a time difference that enables them to respond to the prior day’s ETF flow information, possibly causing increased price fluctuations. On April 2, 2024, Bitcoin experienced its most significant morning decline in Asia, dropping by 6%. This occurrence took place concurrently with data showing Bitcoin ETFs in the US had withdrawn funds.

Shiliang Tang, president of principal trading firm Arbelos Markets, said:

“From a trading standpoint using algorithms, bots appear to be automatically gathering this information for buying and selling purposes. This seems to be the case.”

In January 2024, the debut of US Bitcoin Exchange-Traded Funds (ETFs) significantly impacted the market. A total of $12 billion has been invested in these ETFs since their launch on January 11th. The greatest inflows occurred in early March, when Bitcoin reached an unprecedented price of $73,798. However, the sector has experienced outflows more recently, with some of this being attributed to Bitcoin’s 11% decline from its record high.

The latest market actions indicate the significance of Asian trading hours in determining returns. According to Tang’s analysis, Asian markets delivered strong gains in February and early March. However, this pattern weakened towards the end of March, possibly because of adjustments occurring within Bitcoin ETFs based in the US.

Bitcoin’s Automated Trading Impact on Spot Markets

The impact of automated trading on the crypto spot market extends beyond the initial transactions. According to Coinglass, approximately $354 million in bullish cryptocurrency investments were liquidated on Tuesday – the largest amount in two weeks. This significant figure underscores the far-reaching consequences of automated trading strategies, sparking a chain reaction throughout various financial markets.

The value of Bitcoin in the ETF market currently represents approximately 5.5%, which is significantly greater than the 1% held by gold-based ETFs. According to Charlie Morris, Chief Investment Officer at ByteTree Asset Management, this finding implies that Bitcoin’s ETF inflows carry more importance than those of gold.

On the morning of April 3, 2024, Early Wednesdays, Bitcoin encountered hurdles in its path. Its value was recorded at $66,200 in Singapore. This represented a 0.57% drop compared to Tuesday’s finalized pricing. The causes behind this decline were attributed to the speculated ETF inflows and waning expectations of interest rate decreases from the Federal Reserve.

Moving forward, a potential beneficial factor for Bitcoin could be the upcoming halving event slated for April 20, 2024. This occurrence happens every four years and reduces the generation of new Bitcoin units. Some traders believe this reduction in supply may lead to an increase in price.

Market Maturation

Jakob Kronbichler, co-founder of Clearpool Finance, explained that market trends often align with the flow of Exchange-Traded Funds (ETFs). Furthermore, the significant excitement over the past few weeks resulted in a correction, providing the market with a momentary breather.

“Usually, markets look to ETF flow numbers for guidance, according to Jakob Kronbichler, co-founder of Clearpool Finance. Additionally, after an extended period of excitement over the past few weeks, it’s normal for the market to experience a correction and pause for a moment,”

In simpler terms, the unpredictable changes in Bitcoin’s price are becoming increasingly influenced by algorithmic trading and ETF investments. As the Bitcoin market grows more complex, investors should prepare for a more intricate dance between these modern influences and the classic economic factors of supply and demand.

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2024-04-03 12:40