Bitcoin Algorithmic Tracking of ETF Flows Creates Volatility in Asian Markets

Bitcoin investors in Asia have been experiencing major volatility due to the fallout of the automated trading protocols that react to flows taking place in the US Bitcoin ETFs. Every day, updates on the demand for spot Bitcoin ETFs ripple through the cryptocurrency market during Asian trading hours, following the conclusion of US share trading.

On Tuesday, Bitcoin and the broader crypto market experienced their most significant decline in a month during the Asian morning session, driven by data indicating investors were withdrawing funds. Shiliang Tang, president of principal trading firm Arbelos Markets said:

“From an algorithmic trading perspective, bots can basically auto-scrape this data and buy and sell based on this. It seems that’s basically what is happening.”

Bitcoin ETF Inflows Cool down

On the other hand, the Bitcoin ETF market also experienced some volatility recently. Inflows reached their peak in the initial two weeks of March, coinciding with BTC’s rally to its all-time high of $73,798. Since that pinnacle, the sector has experienced intermittent periods of outflows, leading to a decline of approximately 11% from the token’s historic peak.

Charlie Morris, Chief Investment Officer at ByteTree Asset Management, highlighted that approximately 5.5% of Bitcoin is held within the broader ETF sector, contrasting with gold’s 1% allocation. According to Morris, this makes ETF flows more impactful for Bitcoin than for gold.

Tang further noted that this flow pattern elucidates the varying market returns during Asian trading hours. There was a notable strength visible in February and early March, followed by a decline in later March.

Additionally, the liquidation of bullish crypto wagers, totaling about $354 million on Tuesday according to Coinglass data, is due to algorithmic protocols offloading BTC. This activity can trigger ripple effects in the derivatives market.

The Bitcoin price tanked over 6% on Tuesday moving all the way lower to $65,400. The industry is closely awaiting the upcoming Bitcoin halving which could induce a major supply shock in the market while driving the prices higher.