CryptoQuant founder Ki Young Ju recently raised concerns about the continuous influx of capital into spot Bitcoin ETFs, warning of a potential sell-side liquidity crisis within six months if the trend persists. Ju emphasized the detrimental effect of the ongoing influx of capital on the market dynamics, suggesting that bears cannot win in this scenario.
In the past week alone, spot Bitcoin ETFs witnessed netflows exceeding 30,000 BTC, with major players such as exchanges and miners collectively holding approximately three million BTC, and 1.5 million BTC held by entities within the U.S. Recent data from BitMEX Research indicates that spot Bitcoin ETFs surpassed the $10 billion inflow mark for the first time since their launch in January.
The surge in spot Bitcoin ETF inflows has raised concerns among market observers about the potential for a future sell-side crisis. There is a growing fear that once the tipping point from spot Bitcoin ETF demand is reached, the impact on BTC’s price could surpass market expectations, leading to a cyclical top exceeding projections due to limited sell-side liquidity and a thin orderbook.
Highlighting ongoing trends, Ju noted an uptrend in BTC held by “accumulation addresses” – wallets characterized by only inbound transactions. However, he stated that the accumulation address must reach around 3 million BTC for the crisis to materialize. This trend indicates a significant amount of capital being amassed in anticipation of future market developments.
Recent findings show that there has been a notable surge of capital directed towards spot Bitcoin ETF products within the U.S. market. Specifically, on March 11, $505 million was the netflows in these products, with BlackRock leading the way with daily inflows amounting to $562 million. VanEck’s HODL product also observed a noteworthy uptick, as inflows soared to a remarkable $118 million on the same day.
The surge in inflows into VanEck’s HODL product can be attributed to a campaign announced by the company. VanEck has initiated a fee waiver campaign effective from March 12 until March 31, 2025. During this period, fees for the product will be waived until its assets reach $1.5 billion, after which a 0.20% fee will be imposed. This marketing strategy aims to attract more investors and increase the product’s asset base.
The continuous influx of capital into spot Bitcoin ETFs raises concerns about a potential sell-side liquidity crisis in the market. Market observers and analysts are closely monitoring the situation, as the impact of these inflows on BTC’s price and market dynamics could be significant in the near future. It is essential for investors and stakeholders to stay informed and be prepared for any potential market disruptions that may arise from this trend.
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