In its first week, the newly launched Bitcoin exchange-traded funds (ETFs) experienced a significant withdrawal of $888 million from March 18 to March 22. This marked a shift from the previous week’s inflow of $2.57 billion and raised questions about the sustainability of Bitcoin’s recent rally to $70,000 on March 25.
Some market participants believed that institutional inflows played a crucial role in driving Bitcoin to its all-time high of $73,755 on March 14. This led to doubts about the 9% gains seen between March 23 and March 25, especially since the S&P 500 index was unable to maintain its own all-time high on March 21.
Analysts suggested that Bitcoin was facing a reality check after the hype from ETF investors propelled it to a new high before the halving. While a 15% gain from March 20 to March 25 doesn’t completely dismiss bearish concerns, Bitcoin’s market behavior indicates that its bullish momentum isn’t solely dependent on spot ETF inflows.
Some traders believe that the recent approval of a $1.2 trillion spending package by the United States on March 23 is a positive catalyst for Bitcoin. This is particularly true given the U.S. Federal Reserve’s forecast of three interest rate cuts throughout 2024. With the U.S. deficit expected to reach $1.6 trillion in 2024, the pressure on government debt repayment increases as interest rates remain above 5.25%.
The simultaneous rise of scarce assets like gold, Bitcoin, real estate, and the stock market suggests a weakening U.S. dollar. The performance of the North American currency against the euro and the British pound is less relevant as investors seek refuge from fiat currency devaluation.
While it may seem premature to conclude that Bitcoin’s price will continue to rise due to monetary expansion, it’s important to note that Bitcoin has already surged 64% year-to-date in 2024. Bears arguing that the U.S. fiscal trajectory will lead to a recession, which could negatively affect risk-on assets, miss the fact that Bitcoin’s price has already surpassed their expectations.
Looking at Bitcoin futures contracts, data shows that the annualized futures premium remains largely unaffected by the net spot ETF outflows. An 18% premium level is considered optimistic, indicating that buyers are willing to pay more to open leveraged long positions.
Examining the Bitcoin options market, the skew metric remains in a neutral range since the March rally to $70,000. This suggests a balanced demand for bullish and bearish options strategies and no signs of panic when Bitcoin tested the $62,000 support on March 20.
The indicators from Bitcoin derivatives markets indicate strong price resilience despite the recent spot ETF outflows, reinforcing the notion that the $70,000 support level is gaining strength.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.