Bitcoin Algos Tracking ETF Flows Cited for Token’s Swings in Asia

In recent times, Bitcoin investors have experienced noticeable fluctuations in the Asian market. This odd behavior of the cryptocurrency has been linked to the reactions of automated trading protocols reacting to flow data for US Bitcoin ETFs. Every day, the demand level for Bitcoin ETFs is disseminated across the crypto market in Asian hours. This happens after the close of US share trading.

On one fateful Tuesday, the digital asset suffered its worst drop in a month during the morning hours in Asia. This drop was caused by flow numbers showing investors withdrawing their investments. At that time, Bitcoin was hovering around $66,000. Shiliang Tang, the president of Arbelos Markets, explains this event by saying that bots scrape this data automatically and buy or sell based on it.

U.S Bitcoin ETFs Attraction

The U.S introduced a batch of Bitcoin ETFs on January 11, and since then, it attracted a whopping $12 billion. The inflows peaked in the first half of March when Bitcoin reached a record high of $73,798. However, the token suffered from outflows bouts after the peak and it is now down by about 11% from the all time high.

This flow pattern explains the strong Asian hours market returns in February and early March. However, its strength dwindled as the month went on. When algorithmic protocols offload Bitcoin that can lead to ripples in the derivative market. As Coinglass data shows, about $354 million of bullish crypto wagers were liquidated on Tuesday which was the highest amount in about two weeks.

The Essential Role of ETF Inflows for Bitcoin

Bitcoin has a significant portion of its holdings in the ETF sector. The Chief Investment Officer at ByteTree Asset Management, Charlie Morris, says 5.5% of Bitcoin is held in the overall ETF sector, against 1% for gold. He stated that "ETF flows are, therefore, more important for Bitcoin than gold."

Bitcoin encountered a nearly 6% drop on Tuesday and has continued to struggle to gain stability since then. Vanishing bets on the Federal Reserve’s interest rate cuts form another stumbling block for digital assets.

Bitcoin's Market Performance

Bitcoin has seen a nearly fourfold rise since the beginning of 2023, recovering from a long time bear market. With the supply of new Bitcoin tokens halving later in the month, traders expect this to positively impact prices.

Jakob Kronbichler, co founder of Clearpool Finance, opines that markets generally take their cue from the ETF flow number and the correction is a natural occurrence for the market to rest.

In conclusion, it's evident that the performance of Bitcoin in Asia seems to be significantly influenced by the flows in the US ETF Market. Investors should, therefore, carefully watch these markets and understand these dynamics to make informed decisions. It also highlights the crucial role that automation and algorithmic trading play in the global financial ecosystem.