Bitcoin (BTC) has experienced a 6.7% drop after almost reaching $72,000 on May 21, settling at $67,100. This decline does not necessarily signal a bearish trend, as Bitcoin is still only 8.7% below its all-time high. However, investors are puzzled why the recent inflows into Bitcoin spot exchange-traded funds (ETFs) haven’t sparked more bullish sentiment.
Distribution of assets by the failed Mt. Gox exchange estate
Data from Farside Investors reveals $1.96 billion in net inflows into U.S. spot Bitcoin ETFs since May 15, equivalent to 64 days of BTC issuance from miners. Notably, the U.S. spot Bitcoin ETF market has now exceeded $50 billion in assets under management. In comparison, U.S. gold ETFs hold about $118.5 billion, according to the World Gold Council.
Moreover, inflows into spot Bitcoin ETFs typically prompt the withdrawal of Bitcoins from exchanges, which has dropped to its lowest level since March 2018—2.3 million BTC, as per Glassnode data.
Aggregate Bitcoin balances on exchanges, BTC. Source: Glassnode
Although there’s no certainty these coins will be sold in the near term, their transfer to cold storage and custodians outside of exchanges usually reduces market liquidity. This issue becomes more pronounced in bull markets, where thinner order books at higher price levels can amplify price movements due to aggressive buying.
Consequently, if institutional investors continue to acquire Bitcoin through ETFs yet the price keeps falling, it’s likely that selling pressure originates from the regular spot markets. It’s suggested that the movement of 141,686 BTC by the bankrupt Japanese exchange Mt. Gox on May 28 indicates an imminent asset distribution to its creditors, ahead of the scheduled deadline on October 31.
Over $9.4 billion worth of Bitcoin is owed to about 127,000 creditors of Mt. Gox, who have been waiting for over a decade since the exchange’s collapse in 2014 due to multiple hacks. Despite the short-term negative impact on Bitcoin’s price, Anndy Lian, an intergovernmental blockchain expert, believes that repaying this debt will resolve a longstanding issue and permanently remove the associated…
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