Are $530M Bitcoin ETF Inflows a Blessing or Caution?

A popular trader, Skew, has sounded the alarm, warning of a potential local BTC price top following a whopping $530 million inflow into Bitcoin exchange-traded funds (ETFs). But is this surge a harbinger of bullish momentum or a potential trap? 

Skew’s Observed Pattern 

Bitcoin has become a popular choice for investment, which has sparked renewed interest in Bitcoin ETFs. In particular, the BlackRock iShares Bitcoin Trust (IBIT) received a large investment of $523 million, all on its own, on June 22. 

BlackRock buys 7759 BTC ($523m)!!

HUGE pic.twitter.com/RgFXSSjOt0

— Julian Fahrer (@Julian__Fahrer) July 22, 2024

However, history warns us to tread cautiously. Large inflow days have historically preceded BTC price sell-offs. 

Another large inflow day$BTC
As bullish as this is each other time IBIT reported mid – high 9 fig inflow days it occurred around market supply zones

somewhat a headline curse lol

So in terms of actually trading this, the obvious part is now does the market sustain this… https://t.co/qdGwMAvVjl pic.twitter.com/iZ921tpKHW

— Skew Δ (@52kskew) July 23, 2024

As Skew aptly put it, “As bullish as this is, each other time IBIT reported mid-high 9-figure inflow days, it occurred around market supply zones.” In other words, when the going gets tough, the tough might be getting out, or so it seems.

BTC/USDT Chart with peak IBIT returns. Source: Skew

Notwithstanding, this isn’t the first time we’ve seen this pattern. According to data from UK-based Farside Investors, the July 23 netflow for US spot ETFs was 533.6 million, the most since March. Back in March, BTC hit its all-time high, and the market dipped by nearly 25% shortly. It seems that when the ETF inflows rise, the Bitcoin price falls. It’s a classic case of “what goes up must come down.”

US spot Bitcoin ETF netflows (screenshot). Source: Farside Investors

But it’s not all doom and gloom. Skew highlights “consistent” demand for spot, spot takers absorbing supply, and overall seller absorption as key requirements to sustain current levels and further upside. In other words, if the market can maintain this demand and momentum for higher prices, we might just weather the storm.

Sustaining Demand and Momentum

The big question now is whether the market can keep up with the demand and continue to increase in price. To figure this out, we need to think about a few things. Here are two important ones.

First, there needs to be a steady demand for Bitcoin. Luckily, we’ve seen people buying Bitcoin and taking up the supply, which is a good sign for stabilizing prices.

Second, Bitcoin needs to be able to handle the pressure from sellers. If Bitcoin can deal with people selling off their Bitcoin, it might keep going up in price.

While all this is happening with Bitcoin and ETF investments, Ethereum (ETH) has taken a different path. US regulators have given the green light, and Ethereum ETFs started trading on July 23. 

ETH/USD 1-hour chart. Source: TradingView
Surprisingly, ETH’s response has been muted. Unlike Bitcoin’s explosive rally before its ETF launch, ETH has remained relatively flat, with just a 1.5% gain over the past week. Some analysts view this lack of enthusiasm as a negative reaction, suggesting that the market is waiting to see who “sells the news” first.

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