Bitcoin returns to $64K, has the trend reversed?
Bitcoin’s trend was erratic last week. Firstly, the largest outflow of funds from Bitcoin ETF occurred on May 1st. Simultaneously, the unexpectedly high March labor wage figures strengthened investors’ expectations of Fed tightening, causing the Bitcoin price to briefly drop below $57,000. However, a turnaround occurred on Friday when the U.S. Labor Department released the April employment report, indicating a cooling job market, reigniting hopes for a Fed rate cut. Bitcoin saw a strong rebound, surging back above $64,000 on May 5th, with significant fluctuations and doubled contract trading difficulty.
Bitcoin surged overnight from $59,000 to $63,000, somewhat indicating the end of the cryptocurrency market’s “safe-haven dividend” as tensions in the Middle East eased and central banks’ gold accumulation slowed. Cryptocurrencies are reverting to a trend following the Fed’s interest rate policy.
As investors’ risk appetite in Bitcoin ETFs correlates with Fed interest rate policy, Bitcoin ETFs have become a key determinant of cryptocurrency prices once again. Comparing Bitcoin ETF fund flows with Bitcoin prices from last week reveals a high correlation between the two.
Existing Bitcoin ETFs settle in cash, meaning that net outflows force fund companies to sell Bitcoin holdings for fiat currency to pay investors. Now, let’s discuss the current situation and short-term trends of Bitcoin ETFs.
GBTC Bitcoin ETF sees a long-awaited net inflow of funds.
Although Bitcoin ETFs are significant, predicting long-term net inflows and outflows is nearly impossible. Weekly changes in ETF funds are frequent due to brokerage operations and investor turnover. Long-term popularity determines whether an ETF is favored by investors. The high-growth period for Bitcoin ETFs is over, and predicting future fund flows will become more challenging.
From April 24th to May 2nd, Bitcoin ETFs experienced seven consecutive days of net outflows totaling $1 billion, coinciding with Bitcoin’s price decline to $57,000. However, on May 3rd, a major reversal occurred with net inflows reaching $360 million, driving Bitcoin prices back to $63,000. The largest portion of the $360 million inflow, $102 million, came from Fidelity’s FBTC, with the remaining $260 million distributed among other Bitcoin ETFs. Notably, Grayscale’s GBTC also saw a net inflow of $60 million, contributing to the surge in Bitcoin prices.
It is expected that net inflows will continue for the next few days. Last week saw seven consecutive days of outflows, coupled with a more relaxed market sentiment following the employment report and the completion of earnings reports for U.S. and other tech stocks. With reduced instability, funds are likely to flow back into cryptocurrencies and other risky assets, including Bitcoin ETFs and tech stocks. Greed will drive funds back into the market, indicating a stable rebound in Bitcoin prices.
It is worth noting that leveraged contracts have had little impact on market fluctuations since last week. Profitability is challenging due to frequent fluctuations and narrow profit margins. My short-term fair price target for Bitcoin remains around $70,000, about 32% higher than the current mining cost price of $53,000. This is a reasonable valuation that can sustain stable hash rates and average mining operation costs. Barring any surprises, Bitcoin is expected to experience a gradual rise this week.
This trend of inflows is expected to continue unless new data expectations turn bearish. After Bitcoin’s rapid rise on Friday, its ability to hold steady indicates limited selling pressure, suggesting a positive outlook for this week’s trend.
Looking at the monthly chart, April’s decline was minimal, increasing the likelihood of a rebound in May. This suggests that the bull market will continue, but failure to rebound may lead to a few months of sideways movement. The weekly chart shows a strong demand surpassing supply. Overall, both the candlestick trend and the macro perspective indicate Bitcoin’s continued strength.