- March 12, 2024
- Posted by: [email protected]
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As institutional interest in Bitcoin continues to rise, Ki Young Ju, CEO of CryptoQuant, has expressed concerns about the potential consequences of sustained inflows into spot Bitcoin exchange-traded funds. In a comprehensive thread, Ki warned of a looming “sell-side liquidity crisis” within the next six months, attributing the heightened institutional involvement to the remarkable success of spot Bitcoin ETFs in the United States, which currently boast a collective value nearing $30 billion.
Despite the success of Bitcoin ETFs, Ki cautioned that this trend could lead to a significant imbalance where the demand for Bitcoin surpasses the available supply. This imbalance, if left unchecked, could result in a Bitcoin ETF liquidity crisis, characterized by a scarcity of available Bitcoin for sale. Notably, Ki emphasized that sustained inflows into spot Bitcoin ETFs could keep market bears at bay, making it challenging for them to regain control.
Offering deeper insights into the current state of Bitcoin holdings, Ki disclosed that spot ETFs alone amassed over 30,000 BTC in the previous week. When combined with the approximately 3 million BTC held by exchanges and miners and the staggering 1.5 million BTC held by entities in the United States, the potential for a sell-side liquidity crisis becomes more apparent. Ki remarked, “At this rate, we’ll see a sell-side liquidity crisis within 6 months.”
The Grayscale Bitcoin Trust (GBTC), despite experiencing daily outflows of around $500 million, has maintained the stability of its BTC holdings. This resilience is attributed to Bitcoin’s consistent price appreciation since the ETF’s launch in January, providing investors with a hedge against outflow-related value erosion.
Looking ahead, Ki anticipates that once the tipping point of ETF demand is reached, the impact on Bitcoin’s price could surpass prevailing market expectations. A sell-side liquidity crisis would not only limit the availability of sellers but also thin out the order book, potentially resulting in a higher cyclical top for the cryptocurrency.
Moreover, Ki shed light on the ongoing upward trend in Bitcoin holdings by “accumulation addresses.” These addresses, which exclusively receive inbound transactions, indicate a positive accumulation sentiment. However, Ki noted that these holdings would need to double before the market experiences a potential crisis, as recent surges in Bitcoin’s price have caused accumulation and growth to moderate.
In related developments, the US Securities and Exchange Commission (SEC) recently deferred its decision on options trading for spot Bitcoin ETFs, extending the response deadline for both the Cboe Exchange and the Miami International Securities Exchange. Analysts, including VettaFi’s Dave Nadig, foresee that the introduction of BTC ETF options could draw in hedge fund players previously uninvolved in the crypto ecosystem, presenting them with fresh market participation opportunities. Simultaneously, the SEC is reviewing several leveraged Bitcoin ETFs, reflecting an ongoing evolution in cryptocurrency investment products. The landscape continues to evolve, with these developments underscoring the dynamic nature of the crypto market and its increasing integration with traditional financial instruments.
