The US Bitcoin Exchange-Traded Funds (ETFs) have, in recent times, proven to be nothing less than historical. With 17 consecutive days of net additions, their financial prowess has been felt across the globe. One Tuesday will forever remain etched in memory as the day that saw inflows round off at an impressive $886.6 million – the second-highest single-day influx ever recorded since the funds’ unveiling.
What happened next was equally remarkable. The inflow engine revved up once again, churning out an additional $488.1 million – an impressive showing steered forward by heavyweights Fidelity ($220.6 million), Blackrock ($155.1 million), and Ark ($71.4 million). Behind all this flurry of financial inflow, Bitcoin’s price barely showed any uptick, floating languidly from $68,000 to $71,000 over the week.
This rather odd performance of muted reaction amidst a substantial inflow surge has left both analysts and market observers scratching their heads in wonder. The inflows were expected to exact a more pronounced upward thrust on the prices of Bitcoin. The dampened price response, however, points towards other possible counteracting forces at work.
A somewhat enlightening explanation was brought forward by The Kingfisher, a crypto trading analytics platform. They hinted at the influence of a carry trade strategy on price dynamics, noting that a potential carry trade might be playing a significant role in buffering the anticipated price fluctuation. Essentially, this involves shorting Bitcoin futures while concurrently buying Bitcoin ETF shares or spot Bitcoin, cushioning against prospective price volatility and taking advantage of the disparities between futures prices and spot prices.
A figure known as JJ the Janitor amplified The Kingfisher’s point. Using the PANDA Terminal chart’s patterns, he painted a clearer picture of how this strategy works. His analysis also suggests strategic market manipulation — a blurry meeting point between sharp investment tactics and probable ethical misgivings — that raises the question, ‘Is market manipulation distinct from smart investment strategy?’
This intriguing debate attracted an engaging discourse within the crypto community. One active participant, Sahra, took a jab at the practicality of carry trade. She reasoned that while carry trade should, in theory, suppress funding rates, the current rates are surprisingly low, suggesting that other forces may be at work in the market.
Responding to Sahra’s skeptic take, The Kingfisher conceded to the perplexing observation. He counter-argued that while a carry trade might be in motion, it doesn’t constitute the prevalent force in the market. Elements like bullish sentiment or other buying pressures could be counterbalancing the anticipated downward pressure of funding rates from the carry trade.
At the moment of publishing, Bitcoin was trading at an astounding $70,803, with the Bitcoin price stalling ever so slightly at $71,000.
