Bitcoin ETF Inflows Surge: Is the Market Rally Returning?

Bitcoin's price surged over 8%, reaching more than $93,000 within just 24 hours, driven by renewed interest in exchange-traded funds (ETFs) spearheaded by BlackRock.

Key Takeaways

Bitcoin's price rose over 8% to above $93,000 due to renewed ETF inflows.
BlackRock's IBIT ETF saw a $120 million inflow, with other ETFs also attracting investments.
The so-called "Vanguard effect" is breathing new life into the BTC market.
Analysts suggest monitoring the $98,000-$100,000 level for future price movements.
The macroeconomic environment currently supports riskier asset investments, like cryptocurrencies.

Bitcoin ETF

On December 2nd, BlackRock's iShares Bitcoin ETF (IBIT) experienced a $120 million net inflow in a single day, reflecting a significant 7% jump. Additionally, Fidelity’s Bitcoin ETF (FBTC) and Bitwise’s BITB attracted institutional investments of $22 million and $7.4 million, respectively. In contrast, ARK Invest’s ARKB saw a substantial outflow of about $91 million, contributing to a total daily net inflow of $58.5 million.

Bitcoin ETF
Source: SoSo Value

Even with the ARKB outflow, the data from December 2nd indicated the fifth consecutive day of net inflows, helping to stabilize Bitcoin's price above $80,000. This raises the question: are we witnessing a return of the anticipated ‘Santa rally’ in crypto?

The Impact of Macro Trends and the 'Vanguard Effect' on Bitcoin

Bloomberg ETF analyst Eric Balchunas characterized the recent price recovery instigated by IBIT as the "Vanguard effect." On December 2nd, Vanguard, the world's second-largest asset manager with $11 trillion in assets, lifted its crypto trading ban, enabling over 50 million users to engage with crypto ETFs, including IBIT.

Balchunas noted, “The renewed inflows into IBIT are likely sparked by Vanguard clients. There was also $1 billion in trading volume in the first 30 minutes. Even conservative investors are spicing things up in their portfolios.” He concluded that Vanguard played a key role in preventing Bitcoin’s significant decline in Q4.

Conversely, analysts at Coinbase pointed out that the easing macroeconomic conditions were increasing liquidity and the appeal of riskier assets. They stated, “With quantitative tightening coming to an end, and the Fed returning to the bond market, the cash drain from markets seems to be over. This is generally beneficial for risk-on assets like cryptocurrency.” The analysts emphasized that the current macro landscape favors opportunities for breakout trades rather than attempting to catch falling knives.

Traders Eyeing Bitcoin's $100K Milestone

Following an extended downward trend in Bitcoin's price in recent weeks, significant support levels have been breached, particularly the $98,000 to $100,000 range, which has been a crucial cost basis for many bullish investors. According to Coinbase analysts, this is the next important level to monitor.

Bitcoin ETF
Source: Coinbase/Glassnode

In simpler terms, reclaiming these price levels might either draw more demand or act as a ceiling for Bitcoin’s recovery, especially if many bullish investors decide to cash out and secure their profits at that juncture. Swissblock analytics echoed Coinbase's optimistic outlook, predicting a potential ‘tactical recovery’ starting in mid-December based on previous liquidity capitulation events that led to strong rebounds after 1–3 weeks.

Bitcoin ETF
Source: Swissblock

Despite the positive sentiment, caution is advised, as the unwinding of the Yen carry trade seems probable. There is an 86% likelihood of a 25-basis-point rate hike by the Bank of Japan (BoJ) during its upcoming meeting on December 19th.

Conclusion

The current dynamics around Bitcoin and its ETFs illustrate the potential for renewed market momentum. As analysts keep a close watch on critical price thresholds and macroeconomic indicators, it’s vital for investors to stay informed about ongoing trends in this evolving landscape.