Bitcoin faced a significant correction last week, falling from the original $69,000 to $63,000. Although it once rose back to $68,000, it subsequently fell back to $63,000 due to the sell-off of GBTC funds, which became the main reason for the recent decline in the cryptocurrency market. Bitcoin The currency spot ETF is very influential at this stage, and the rise and fall almost follow the inflow and outflow of ETF funds.
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Although the U.S. Federal Reserve’s interest rate decision last week did not have a big impact on the cryptocurrency market, let’s briefly talk about it. The U.S. Federal Reserve decided last week that the benchmark interest rate will remain at the current level, which is 5% to 5.25%. and believes that the United States has made great progress in suppressing inflation. The current goal is still to maintain the annual inflation rate below 2% before further discussion of interest rate cuts is possible.
The interest rate dot plot produced by this vote shows that officials currently predict that there will be three interest rate cuts of one yard each this year. The overall tone is consistent with the past several speeches. Even though last month's price index exceeded market expectations, the downward trend of inflation remains unchanged. Next, the Fed will only need to see the annual growth rate of the price index CPI for two to three consecutive quarters. If the interest rate is close to 2% or below, it is possible to take interest rate cuts to prevent the U.S. economy from falling into recession under a long-term high interest rate environment.
It is worth noting that the market currently predicts that interest rates will be cut at the FOMC interest rate resolution in June this year, which means that the annual price index growth rate for the next three consecutive months must be reduced to the 2% to 3% range before the Federal Reserve can The decision to cut interest rates in June seems a bit reluctant given the current inflation viscosity. We think the market is a bit too optimistic.
The U.S. economy should not fall into recession so quickly. The Fed's interest rate cuts should be concentrated in the second half of this year, rather than taking measures in June. On the contrary, it will rekindle inflation expectations. However, a rate cut will happen sooner or later. It just depends on the timing and how fast it should be cut. problem, so we believe that the interest rate issue will not affect the cryptocurrency market too much in the short to medium term, and the trend of downward inflation remains unchanged.
Bitcoin Spot ETF Buying Power Is Insufficient
The problem in the market now is not interest rates, but Bitcoin spot ETFs have shown net outflows over the past week, which means that the buying craze for ETFs is not as enthusiastic as in previous weeks. In addition, Grayscale’s GBTC continues to be under pressure. Customer redemptions, because the cash redemption system forces Grayscale to sell Bitcoins to repay shareholders, causing market selling pressure, even if subsequent funds are still transferred to purchase other cryptocurrency funds, it will still put pressure on prices in the short term.
Considering that the market is not as popular as in the past quarter, and many ETF investors who are new to the crypto do not have as strong a belief in Bitcoin as players in the cryptocurrency market, the current ETF buying momentum is obviously much weaker. Although the overall scale is still growing, The growth of other Bitcoin ETFs failed to make up for GBTC's capital outflows. From March 18 to March 20, the amount of capital inflows and outflows was US$836 million. Only a single GBTC had capital outflows, and the rest were net growth.
Since leverage and contract traders are currently very active in the market, price fluctuations will also be amplified. When Bitcoin ETF funds begin to flow out significantly, the market will be more susceptible to option settlement and leverage adjustments due to insufficient buying power.
Assuming that the current buying volume of Bitcoin ETF cannot recover to exceed the outflow rate of GBTC, then ETF may become the main force of selling. Fortunately, except for the inflow and outflow of GBTC funds, the scale of other Bitcoin ETFs is still growing, but it is also Net outflows from other funds in the future cannot be ruled out.
If there is no surprise, due to the high management fees, GBTC will continue to outflow funds in the future. The subsequent market trend depends on whether other Bitcoin ETFs can make up for its capital outflows. Prediction is quite difficult. We will continue to observe the funds of Bitcoin ETFs. In and out conditions, this will be a very useful indicator in the short term. If continuous small capital inflows begin to occur, the currency price will have a higher probability of jumping.
Relatively speaking, if ETFs begin to experience uninterrupted outflows, investors must be very careful. It is mandatory for these institutions to sell Bitcoin. At that time, they will be advised to leave the market decisively and wait for the market to regain its footing before making arrangements. There is still time. In the medium and long term, the United States will cut interest rates sooner or later, which will help the price performance of cryptocurrency. However, interest rates no longer have much influence. Whether the Bitcoin ETF just mentioned can continue to bring buying to the market is More importantly, according to the market capitalization ranking, there is still a lot of room for growth in Bitcoin ETFs, and we are still optimistic about the long-term price.
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