Trading Bots in Asia React to ETF Flows Data After Market Closure, Leading to Pronounced Swings

Bitcoin investors in Asia are experiencing significant price swings as automated trading protocols react to flows data from US exchange-traded funds (ETFs) that hold the cryptocurrency. 

The impact of these automated trading algorithms is particularly felt during Asian trading hours following the close of US share trading, when daily figures on the demand for spot-Bitcoin ETFs are released, according to a report from Bloomberg. 

The recent market drop in Asia serves as a good example of the influence of these automated trading protocols. 

On Tuesday, Bitcoin experienced its worst decline in a month during the Asian morning, as investors reacted to the flows data indicating a withdrawal of funds from Bitcoin ETFs. 

Bitcoin ETF Flow – 01 April 2024

All data in. $86m net outflow pic.twitter.com/XvBwCUYvVE

— BitMEX Research (@BitMEXResearch) April 2, 2024

Trading Bots Buy and Sell Based on ETF Flows Data

Shiliang Tang, the president of the principal trading firm Arbelos Markets, told Bloomberg that trading bots can automatically analyze and react to this data, resulting in buying or selling actions. 

The automated response is believed to be a major contributing factor to the pronounced swings in the market.

Since their launch on January 11, US Bitcoin ETFs have attracted a net inflow of $12 billion. 

The inflows peaked in the first half of March, coinciding with Bitcoin’s record high of $73,798. 

However, the sector has experienced periods of outflows since then, and Bitcoin has declined approximately 11% from its all-time peak. 

This pattern of flows helps explain why market returns during Asian trading hours were particularly strong in February and early March but weakened later in March.

The impact of algorithmic protocols dumping Bitcoin extends beyond the spot market and affects the derivatives market as well. 

According to Coinglass data, approximately $354 million of bullish crypto wagers were liquidated on Tuesday, marking the highest amount in about two weeks.

ETF Flows Significantly Impact Bitcoin Market

The significance of ETF flows in the Bitcoin market is evident when comparing it to other assets. 

Charlie Morris, Chief Investment Officer of ByteTree Asset Management, notes that Bitcoin ETFs hold about 5.5% of the total Bitcoin supply, while gold ETFs hold only 1% of the total gold supply. 

This indicates that ETF flows have a greater influence on Bitcoin prices compared to gold.

On Tuesday, Bitcoin experienced a nearly 6% drop and continues to struggle to regain traction, currently trading at around $65,400. 

Furthermore, diminished expectations of Federal Reserve interest-rate cuts present an additional challenge to digital assets.

Despite recent setbacks, Bitcoin has shown remarkable growth, surging approximately fourfold since the beginning of 2023 when it started its recovery from a bear market. 

Additionally, the upcoming halving event, which will reduce the supply of new Bitcoin tokens, is viewed by some traders as a potential support for prices.

Market participants have been closely monitoring ETF flow numbers as a key indicator of market sentiment. 

Jakob Kronbichler, co-founder of decentralized credit marketplace Clearpool Finance, suggested that the recent correction in Bitcoin’s price is a natural response to the market’s excitement over the past few weeks and serves as an opportunity for the market to take a breather.

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