Bitcoin ETF Influenced By Global Liquidity And Economic Conditions

According to PANews, Matrixport's latest weekly report highlights that Bitcoin ETFs are increasingly affected by global liquidity, macroeconomic conditions, central bank policies, and institutional capital flows as Wall Street fully embraces Bitcoin. The strengthening U.S. dollar has led to a decline in this liquidity indicator, suggesting potential downward pressure on Bitcoin prices. Global liquidity peaked at the end of December 2024, and the significant strengthening of the dollar provides a clear explanation for Bitcoin's continued pullback. Looking ahead, the forward-looking characteristics of this time series indicate that once this pullback ends, possibly lasting until March or April, Bitcoin may attempt to return to its previous highs. Wall Street investors entering the Bitcoin market are categorized into two groups. The first group consists of wealth and asset managers, likely representing wallets holding 100-1000 Bitcoins. This group has become the largest Bitcoin holders, surpassing the previously dominant whale wallets. The second group comprises hedge funds that focus on non-directional returns through arbitrage strategies rather than betting on the long-term rise of Bitcoin prices. When crypto traders are bullish, they typically use futures positions to drive up funding rates, providing arbitrage opportunities for hedge funds. These funds short Bitcoin futures while buying Bitcoin spot or Bitcoin ETFs, earning profits through the funding rate differential. These hedge funds collectively hold $10 billion in Bitcoin ETFs, with total inflows reaching $39 billion, indicating that at least 25% of Bitcoin ETF funds are related to arbitrage trading. According to calculations, 55% or more of ETF fund inflows may originate from hedge funds focused on arbitrage rather than investors genuinely believing in Bitcoin's long-term growth potential. Since the FOMC meeting in December last year, profit opportunities have significantly decreased, followed by a decline in trading volume. Consequently, it is not surprising that hedge funds have begun unwinding arbitrage positions. This trend is reflected in record outflows from Bitcoin ETFs, as these funds exit trades that are no longer profitable.