Bitcoin exchange-traded funds (ETFs) witnessed an astonishing $1.05 billion in net inflows on March 12, as reported by SoSoValue data.
This achievement marks a new pinnacle for single-day net inflows since the inception of Bitcoin spot ETF trading, marking a notable 56% surge compared to the $673 million net inflow recorded on February 28.
The upsurge in net inflows into Bitcoin ETFs correlates with the ongoing rally in Bitcoin’s price, which has been reaching unprecedented levels recently.
At present, the foremost cryptocurrency is valued at $73,517.03, hovering near its all-time highs.
Data sourced from CoinMarketCap reveals that Bitcoin reached an all-time high (ATH) of $73,637 earlier today.
Spot Bitcoin ETFs See Continued Inflows
As Bitcoin continues to demonstrate robust performance, investors are increasingly turning to regulated investment vehicles such as ETFs to gain exposure to the digital asset.
Bitcoin ETFs provide investors with an avenue to indirectly invest in Bitcoin without the need to directly hold or manage the underlying asset. These investment instruments track the price of Bitcoin and enable investors to trade its shares on traditional stock exchanges.
The accessibility and convenience offered by Bitcoin ETFs have significantly boosted their popularity, leading to substantial capital inflows.
The unprecedented net inflows into Bitcoin ETFs underscore the surging demand for regulated investment options in the cryptocurrency market. In fact, Bitcoin ETFs have witnessed the most successful launch in ETF history.
These products amassed over 30,000 BTC in the past week alone, currently holding assets worth close to $30 billion.
ETF Inflows Could Trigger a ‘Sell-Side Liquidity Crisis’
Ki Young Ju, CEO of the on-chain analytics platform CryptoQuant, suggests that if the trend of institutional inflows into Bitcoin continues, it could lead to a unique situation where the demand for Bitcoin exceeds its available supply, potentially resulting in a liquidity crisis for Bitcoin ETFs.
Ki anticipates a significant shift in BTC supply dynamics within the next six months due to this trend. He emphasizes that as long as inflows into spot Bitcoin ETFs persist, market bears will struggle to exert control. This could result in a scarcity of Bitcoin available for sale, further driving up its price.
In contrast to this trend, the Grayscale Bitcoin Trust (GBTC) is experiencing daily outflows of approximately $500 million, indicating a deviation from the overall market pattern.
Despite the outflows, the value of GBTC’s BTC holdings has remained relatively steady, largely thanks to the appreciation of Bitcoin’s price since the ETF’s launch in January.
When the tipping point of ETF demand is reached, Ki predicts that the impact on Bitcoin’s price could surpass market expectations. A sell-side liquidity crisis could ensue, constraining the availability of sellers and resulting in a thinner order book. This scenario could potentially lead to a higher cyclical peak for the cryptocurrency.
Ki also pointed out the ongoing uptrend in BTC held by “accumulation addresses,” which are wallets that solely receive inbound transactions. However, these holdings would need to double before a crisis arises, as Bitcoin’s recent surge to new all-time highs has caused accumulation address holdings to plateau.
