Crypto Recovering from the Bitcoin ETF Hangover
Image © Adobe Stock
Written by Samer Hasn, Market Analyst at XS.com.
Cryptocurrencies are trying to consolidate today after the bad performance they recorded throughout the second half of last week, which led to unexpected weekly losses.
After Bitcoin recorded its lowest weekly close since the week ending last December 11, it returned and recorded gains of more than 2% this morning.
Bitcoin's movements in recent days come with lukewarm investor sentiment after the launch of Bitcoin ETFs last week, with mixed performance recorded by those funds.
During the first two days of Bitcoin spot ETFs trading, we saw net inflows of approximately $819 million into these funds.
Above: Bitcoin at weekly intervals.
While the ETFs, excluding the Grayscale Bitcoin Trust (GBTC), recorded net inflows of approximately $1.4 billion, the former recorded net outflows of approximately $579 million.
The outflows from GBTC are due to investors turning to other mechanisms for investing in Bitcoin, according to what analysts have discussed.
Despite weaker-than-expected flows, trading volumes during the first week were impressive, with more than $7.4 billion in total ETFs.
With the beginning of the new week as well, the Crypto Fear and Greed Index has turned to “neutral” after three months of “greed” during the period of talk about approving the launch of these ETFs.
However, even excluding GBTC outflows, net inflows were generally below expectations.
Perhaps the expectations themselves were greatly exaggerated, and this is what we always see in the cryptocurrency communities and which continues every day.
These flows will receive close attention from the market in an attempt to measure the extent to which investors of all segments have adopted Bitcoin.
This, in turn, encouraged more criticism of both Bitcoin and new ETFs.
For example, we witnessed the talk of the famous investor, Kevin O’Leary, who said that he and institutional investors would not buy these ETFs due to their high and unjustified fee, according to him.
Of course, this is not the end, and the impact of these ETFs may take time to crystallise.
Many moderate and even highly optimistic forecasts are beginning to believe this narrative. This is because the fantastic gains of Bitcoin that were talked about even on the first day may take a long period to be achieved in a sustainable manner.
Pumping institutional investors' money into these funds in an effective sum may take months to years, in addition to adopting cryptocurrency technology in various aspects of use.