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Spot Bitcoin ETFs Boost US Cryptocurrency Market

Bruno T
Latest News
February 29 2024 12:52AM

The introduction of new spot Bitcoin Exchange-Traded Funds (ETFs) in the United States is revolutionizing the market for the well-known cryptocurrency, significantly expanding the demand for the token and attracting over $7 billion in net inflows in less than two months.

One of the most notable consequences of this surge in interest is the more than 45% increase in Bitcoin’s price (COIN:BTCUSD) this year, reaching around $63,000 and nearing the pandemic-era record of almost $69,000.

One of the contributing factors to this rise is the anticipated halving of Bitcoin’s supply growth, an event that historically has fueled significant appreciations in the asset. Furthermore, ETFs are shifting the center of gravity for Bitcoin trading towards the US, encouraging leveraged bets that have raised the cost of bullish positions through perpetual futures to levels not seen since 2021.

Meltem Demirors, a consultant at Coinshares, highlighted in an interview with Bloomberg Television the depth of the supply and demand imbalance created by this new market dynamic.

The impact of Bitcoin ETFs is spreading throughout the market, with the cryptocurrency’s performance outpacing stocks since the beginning of the year and attracting traders looking for opportunities in a volatile market. These ETFs, which adjust their net asset value daily based on dedicated benchmarks, are facilitating Bitcoin price discovery, especially during US market closing times, where an increase in the token’s trading volume has been observed.

The trading volumes in these spot Bitcoin ETFs, which include products from giants like BlackRock Inc. and Fidelity Investments, have surged, reaching almost $8 billion on a single day as Bitcoin advanced towards new records.

At the same time, the amount of Bitcoin traded on major cryptocurrency exchanges also hit one of the highest points of the year. The funding rate for Bitcoin perpetual futures, a popular instrument among speculators due to its lack of expiry date, reached its highest level since 2021, indicating strong trader interest in betting on Bitcoin’s continued appreciation and willingness to pay a premium to short sellers to maintain their positions.

The arrival of spot Bitcoin ETFs is therefore not only reshaping the structure of the US cryptocurrency market but also redefining investor expectations and strategies at a time when Bitcoin seeks new price heights and institutional recognition.