Originally published on: October 31, 2024
As institutions flood the US spot Bitcoin exchange-traded funds (ETFs) with hundreds of millions of dollars in net inflows daily, Bitcoin faces a crucial moment to avoid a potential price peak.
Analyst Mark Cullen recently raised concerns about a possible “ETF FOMO,” highlighting the surge in institutional investments in US spot Bitcoin ETFs. Data from sources like UK-based investment firm Farside Investors show a staggering inflow of nearly $900 million on Oct. 30 alone, marking the second-largest influx ever recorded.
While this influx signals heightened institutional interest in Bitcoin, some market veterans warn that past experiences suggest a looming market correction. During previous instances of substantial Bitcoin ETF flows exceeding $900 million and prices surpassing $70,000, the market witnessed a local top followed by a consolidation phase.
Cullen emphasized the need to monitor the impact of ETF flows on Bitcoin’s price, stating, “Just something to think about.” While historic trends point to a potential downturn, the current market dynamics may present a different outcome.
Unlike earlier this year, the substantial availability of Bitcoin on over-the-counter (OTC) desks provides a buffer for large ETF purchases without directly influencing spot prices. This trend, highlighted by on-chain analytics platform CryptoQuant, suggests that the current ETF demand might not trigger a market correction as it did in the past.
However, to break the cycle, CryptoQuant noted that ETF demand would need to escalate even further. The platform also revealed a slowing growth rate in OTC desks’ total Bitcoin balances, indicating a shift in market dynamics.
With Bitcoin trading around $72,000 at the time of writing, the market anticipates further price discovery in US dollar terms. As the price continues its upward trajectory, the influx of institutional investments through ETFs raises cautious optimism among market observers.
The potential for ETF-driven price surges is evident in the iShares Bitcoin Trust (IBIT) from BlackRock, which recorded $875 million in net inflows on Oct. 30. Industry experts project the combined BTC holdings of ETF providers to exceed 1 million BTC soon, signaling a new phase in institutional adoption.
As the crypto market evolves, investors should conduct thorough research and exercise caution in navigating the rapidly changing landscape. With ETF-driven price movements on the horizon, staying informed and vigilant is crucial for making informed investment decisions in the volatile crypto market.
