Bitcoin ETFs Claim Record Volumes, So Why Is BTC Price Static?

Bitcoin’s failure to rally following the approval of spot Bitcoin ETFs continues to puzzle crypto proponents.

Boy doesn't know why the Bitcoin price is very linear.
Created by Kornelija Poderskytė from DailyCoin
  • Bitcoin has failed to spark the rally many expected following spot Bitcoin ETFs’ approval.
  • The lackluster price movement comes despite record-breaking volumes recorded by the recently approved ETFs.
  • Despite high volumes, analysts have highlighted that there might be a lack of fresh capital. 

Before Wednesday, January 11, the dominant narrative amongst crypto enthusiasts was that the approval of spot Bitcoin ETFs in the U.S. would spark a significant rally in the underlying asset’s price. The theory? These products offer an avenue for mainstream adoption by providing a familiar on-ramp for trillions in institutional capital believed to be waiting on the sidelines.

Following the approval of these products and record trading volumes recorded on day one, however, the price of Bitcoin has remained largely static, begging the question of why.

Bitcoin ETFs Shatter Records, But Price Underwhelms

With Bitcoin failing to react to the news of the SEC’s approval of spot Bitcoin ETFs, many looked to the first day of trading to see a market reaction, hoping that significant interest would spark some bullish momentum. But this would not be the case.

On the first day of trading, the recently approved Bitcoin ETFs, including offerings from Grayscale, BlackRock, and Fidelity, recorded volumes exceeding $4 billion. Grayscale’s offering, with $2.3 billion, broke the record for the largest first-day trading volume for an ETF, partly helped by its $27 billion in assets under management that it had held in its trust structure.

Despite these positives, Bitcoin’s price has yet to post the price gains that many have expected, aside from a short-lived run to $49k within the first few minutes of ETF trading.

So why has Bitcoin’s price failed to react as many expected?

A Lack of Fresh Capital?

Despite high volumes, ETF issuers already purchased Bitcoin in advance, and inflows will likely have delayed price effects due to the time it would take to settle trades. In addition, analysts have suggested that some of the volume recorded on the first day can be attributed to retail users moving away from Grayscale to other ETFs with lower fees.

Speaking with DailyCoin, CoinShares Head of Research James Butterfill noted that the unwinding of basis trade positions in Europe as interest shifts to the U.S. also likely affected Bitcoin’s price.

"We have seen the basis trade transfer from Europe to the U.S., where traders exploit the arbitrage between the spot and the futures market, so the unwinding of these positions is likely to have had some impact too."

At the same time, it is also likely that the ETF approval event was priced in when hackers took control of the SEC’s X account on Tuesday, January 10, to claim that spot Bitcoin ETFs have been approved. After the fabricated tweet, Bitcoin experienced a significant spike before wiping out the recorded gains just as quickly as it had printed them.

On the Flipside

  • Analysts had cautioned investors against overestimating the short-term impacts of Bitcoin ETFs on the asset’s price.
  • Ethereum has recorded sizable gains over the past week as speculators anticipate that the SEC will approve spot Ethereum ETFs next.

Why This Matters

Many had anticipated that spot Bitcoin ETFs would lead to significant price gains for the underlying asset. However, the lackluster price movement of the asset has left many investors scratching their heads.

Read this for more information on Bitcoin’s price performance following the approval of spot Bitcoin ETFs:
Bitcoin Eyes $49K as ETFs Hit $1.2B Volume in Minutes

Learn more about the stage 2 of the Polygon zkEVM:
Polygon zkEVM To Bolster DeFi Activity in Mainnet Stage 2

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.