Bitcoin ETFs Gain $1 Billion In A Day Amidst Liquidity Warnings

Bitcoin ETFs Gain $1 Billion In A Day Amidst Liquidity Warnings

On Tuesday, the demand for spot Bitcoin ETFs managed to smash yet another record, as they managed to surpass daily net inflows of $1 billion for the first time.

While there are still consistent outflows from Grayscale Bitcoin Trust (GBTC), they have slowed down significantly to $79 million, which is a decline from $494 million a day earlier.

The inflows

Meanwhile, the total inflows recorded by the iShares Bitcoin Trust (IBIT) of BlackRock reached $849 million, while smaller rivals, such as VanEck, managed to see inflows of $82 million.

Since the ETFs were launched in the market on January 11th, their demand has proven to be rather relentless.

In barely two months, the ETFs have managed to record net inflows of about $11.1 billion. Their performance has undoubtedly managed to shatter all expectations.

Most importantly, they have managed to drive the price of Bitcoin to a new all-time high before its anticipated halving, which is usually followed by record highs.

Collectively, the total number of tokens that are now held by the ten funds has reached 800,000, which is about 4% of the supply of Bitcoin that will ever exist in the market.

The expectations

If they continue to soak BTCs at this rate, some analysts believe that there could be a liquidity crisis in the Bitcoin market, as the supply would be unable to keep up with the overwhelming demand.

Ki Young Ju, the CEO of CryptoQuant, said that 3 million BTC are currently held by known on-chain entities, which also include whales, exchanges, and miners.

On Wednesday, he said that at this rate, a sell-side liquidity crisis is expected to happen in the next six months.

He also added that a liquidity crisis could lead the ‘cyclical top’ of Bitcoin to surpass expectations because the buy orders would be higher than the supply.

The data

While there is a strong demand when it comes to ETFs, the Exchange Netflow dashboard on CryptoQuant shows that there have been stronger outflows than inflows on Bitcoin exchanges in the past month.

A spokesperson for CryptoQuant said that a high value shows that spot exchanges are dealing with pressure and this can point to high volatility on a derivatives exchange.

With that said, the data regarding Bitcoin miners never points to one outcome. Miners are seeing their revenues rise to extremes because of the rise in Bitcoin’s price.

Therefore, they have been moving their holdings on-chain, which indicates that they might be selling some of their tokens.

On the other hand, there seems to be an increase in the total number of Bitcoins held by major miners, such as Riot Blockchain and Marathon Digital.

Thus, this shows that regarding miners, the data is currently mixed and it is difficult to ascertain how things are going.

However, unless there is a slowdown in the ETF inflows, the bull market will likely continue for now.