Edition #3 — Feb 5, 2024
BTC ETF outflows reverse as Fed holds its nerve on interest rates
As January ended, it seems the ETF exodus went with it. In the past week, Bitcoin ETFs have recorded six straight days of net positive inflows totaling nearly $715 million, most of which was carried by BlackRock and Fidelity’s funds, according to recent data from BitMEX.
While GBTC continues to experience withdrawals, the other nine new spot Bitcoin ETF funds saw inflows outpace exits, suggesting the selling pressure may be waning. However, the popularity of Bitcoin ETFs goes beyond crypto.
Since the BTC ETFs were approved, they have quickly become some of the largest ETFs in America. BlackRock and Fidelity’s spot Bitcoin exchange-traded funds (ETFs) were among the 10 largest ETFs by transaction volume, attracting nearly $5 billion in net flows.
The sudden popularity of ETFs has been mirrored in on chain flows of Bitcoin more broadly. January ended the month on a high with $1.21 trillion worth of Bitcoin moved on chain, making it the biggest month for on-chain volume since September 2022.
With the halving less than 80 days away, some market watchers are expecting another surge in price, similar to what happened in the weeks leading up to the ETF approval. But others are more cautious.
The chances of interest cuts by the Federal Reserve dimmed as Jerome Powell, its chair, told reporters that it was “too soon” to know if the work has been done to cool inflation. The news drove down treasuries, as the narrative that interest rates will be aggressively cut gives way to a slower, more measured approach.
Chart of the week
Grayscale’s ETF (GBTC) is the largest, and oldest in the marketplace. What happens in this ETF has serious market implications. When Grayscale converted its closed-loop Fund to an open one in early January, the sell-off began (the blue bars), taking Bitcoin’s price with it (the yellow line).
But in recent days, the drop has tapered off, and Bitcoin’s price has found its way back above $40,000.
BTC Analysis
BTC continues to sit in the same range we found in last week’s analysis.
Our systems are detecting multiple bearish signals at the top of the range. Looking more closely at the order books from different exchanges, we can see that we have more supply at $43,500 — $45,500 than in the $41,500 area that we’re using as current support.
This sentiment is echoed in liquidity pools. Little has changed from last week as key levels remain unchanged: $44,500 remains a key line of resistance, and two lines around $41,000 and $38,000 are acting as support. But things may be about to change.
Below is the order book over on Coinbase. This data suggests a big player is filling their bags at $42,500, suggesting they know something the market doesn’t.
Using TA analysis, we’re experiencing a price contraction since last week, as demonstrated by the tightening triangle below. This pattern typically precedes a breakout in either direction.
Hold on to your hats.
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Coin of the week
The coin of the week is LINK. The token at the heart of the Chainlink ecosystem has been on a tear since Q3 2023, climbing from lows of $7.30 in October to highs of $19.4 today. That trend has continued this week.
Taking a look at this period, we can see that extreme volume in October (the orange lines on the chart below) preceded the spike in price. More recently, buy volume is ticking up again. Both periods also saw the level of open interest contracts for LINK spike, with a record $620 million locked in open futures contracts for the token.
The continued flow of money into futures contracts suggests the market thinks LINK still has more room to grow.
Looking Ahead
The halving is looming large across the markets. With less than 90 days to go, history tells us that typically there will be a “buy the rumor, sell the news” in the lead-up, followed by a sell-off afterward.
This can be seen by upticks in open interest volume, which has been ticking up.
But longer term, halving events typically serves as a catalyst for price movements, meaning 2024 is likely to be a pivotal year for crypto assets.
In the short term, February is typically a strong month for crypto historically, as we can see from data supplied by Coinglass.
Thanks for stopping by! See you next week.
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That’s all for now. Stay tuned for more exciting updates, and we’ll catch you in the next one!
