‘Huge Outflows’ From Largest Bitcoin ETF May Have Triggered the Saturday’s Bitcoin Crash

Source: www.dw.com

The leading Bitcoin spot exchange-traded fund lost about half of its assets last Friday, which could have triggered Bitcoin’s crash on Saturday.

The Purpose Bitcoin ETF recorded an outflow of up to 24,510 Bitcoins on Friday, the highest redemption in a single day since its launch on the Canadian Stock Exchange on April 2021. This is according to Arcane-Research which is based in Norway.

Such an outflow means that the fund had to sell Bitcoin worth $500 million at Friday’s price, piling more pressure on the already ailing cryptocurrency market, Arcane stated in a report.

“The enormous outflows are likely caused by a forced seller in a huge liquidation,” wrote Vetle Lunde, an analyst at Arcane. “The forced selling of the 24,000 BTC could have triggered BTC’s move down towards $17,600 this weekend.”

Source: www.coindesk.com

On Saturday, the Bitcoin price dropped below the $20,000 level, sinking to as low as $17,678. Cryptocurrency traders were rattled by insolvency fears in the cryptocurrency industry, as Celsius, a leading cryptocurrency lender, paused all withdrawals citing “extreme market conditions.” The company has asked its customers for more time to solve the issues it’s facing. Three Arrows Capital, a cryptocurrency hedge fund, also announced that it had made severe losses while BlockFi was seeking additional financing.

The weekend’s price action marked the first time the Bitcoin price had fallen below the all-time high of its previous cycle since December 2017.

ProShares Futures ETF Becomes the Largest

The purpose of Bitcoin ETFs is to track the Bitcoin value and provide a way of investing in the world’s largest cryptocurrency without having to deal with crypto directly. Bitcoin ETFs can be bought, sold, and traded on the traditional stock market exchange platforms rather than on cryptocurrency exchange platforms.

The Purpose Bitcoin ETF was the largest Bitcoin-focused exchange-traded product, managing about 48,000 Bitcoins before Friday’s redemptions. Now, the fund only has about 23,300 Bitcoins.

3iQ CoinShares Bitcoin ETF, which is another Bitcoin-focused fund, recorded large outflows in May, forcing it to sell 7,401 BTC of its holdings.

As a result of the outflows experienced last week, the Purpose Bitcoin ETF has lost its top spot to the New York Stock Exchange-listed ProShares Bitcoin Strategy (BITO) ETF which holds Bitcoin futures rather than spot Bitcoin.

BITO recorded its second-largest net inflows last week since its launch last October, which caused the fund’s Bitcoin exposure to grow by 4,115 Bitcoin. The fund’s assets are about $668 million, which is equivalent to about 31,500 BTC.

According to Arcane, the contract suggests that “at least some U.S. investors are eyeballing the current sell-off in BTC as an attractive point of entry, taking advantage of forced sellers,” for a short-term relief rally.

Last week, cryptocurrency funds that manage Bitcoin received inflows totaling $28 million, an indication that they benefited from the weak prices, reported CoinShares on Monday.

“Opinion amongst investors is extremely polarized, with some seeing this as a great buying opportunity, while others are spooked, liquidating positions,” said James Butterfill, the head of research at CoinShares. “Fund flows are likely to remain mixed.”

Other Crypto News

In some of the latest Bitcoin news, the price of the cryptocurrency is currently trading below the $21,000 mark on Wednesday. Coinbase, Binance, and CoinMarketCap show a Bitcoin price of about $20,498. The following BTC to USD chart shows the changes in the Bitcoin value in the past 24 hours.

Source: CoinMarketCap

Ethereum, the second-largest cryptocurrency by market cap, has also dropped below the $1,100 mark. At the time of writing, the Ethereum price was about $1,093 on Coinbase, Binance, and Coin Market Cap, having dropped by about 4.42% in the last 24 hours.

Source: CoinMarketCap

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