Strong start into the week, U.S. inflation figures, gold all-time highs & ETF inflows

What Happened This Week

Warm up on the weekend and an explosive start on Monday

The total crypto market saw an increase of roughly 2.5% over last weekend and set up nicely for a positive start to the week, with Bitcoin closing the last week at $69’350. Over the course of Monday morning, Bitcoin shot up more than 5% reaching a daily high of $72’777 on Coinbase. This positive Bitcoin performance had an impact on the whole market, with ETH outperforming BTC on Monday with a daily high of $3’729 up almost 10% on Monday. This relative strength of ETH compared to BTC held until Tuesday night, which is visible in the chart below, as ETH was making higher lows against BTC with Tuesday’s high representing a higher high and a bullish break of the recent bearish market structure. It remains to be seen whether it will print a higher low above 0.0484, which would confirm a short-term trend change.

Let’s take a look at some of the news that came out over the weekend and on Monday. Total digital asset investment products saw total inflows of $646 million last week, bringing the year-to-date inflows to $13.8 billion, the highest level in history. Bitcoin is taking in most of these inflows, and Ethereum saw outflows for the fourth consecutive week, while most other altcoins continue to see inflows.

Political parties in South Korea are using Bitcoin and crypto as part of their political campaigns for the parliamentary elections, promising to give access to the new U.S. spot Bitcoin ETFs in the race for votes. South Korea continues to be one of the biggest crypto markets in the world. The spot ETFs are not yet available in many countries, like South Korea, but are showing remarkable volumes and flows.Since their inception, the spot ETFs have brought in an average of $213 million per day.

On Friday evening, the news broke the market, that Bankrupt crypto lender Genesis had completed the sale of its Grayscale Bitcoin Trust (GBTC) shares and used the proceeds to purchase 32’041 Bitcoins. Also on Friday, BlackRock updated its list of Authorized Participants (APs) for its Bitcoin spot ETF. Authorized Participants play a crucial role in the creation and redemption of ETF shares, facilitating the process by transferring cash to and from the Trust Administrator through one or more accounts. Among the new APs are Citadel, Citigroup, Goldman Sachs, and UBS.

The market seems to have interpreted the weekend news as positive, which led to the rally on Monday morning. But the rally was rather short lived once again. With the U.S. markets opening on Monday afternoon our time, Bitcoin and the broader crypto market started correcting to the downside. The correction was not crypto specific, but U.S. equities also traded to the downside in anticipation of the U.S. inflation data release on Wednesday afternoon CET.

Bitcoin reached a daily low on Tuesday at $68’200 and Ethereum also corrected down to $3’450 on Tuesday evening.

U.S. CPI release on Wednesday

The U.S. inflation figures came in slightly hotter than expected, with the annual rate in March coming in at 3.5% (exp. 3.4%). The March CPI print was the highest since September 2023. The hotter than expected print led to a sharp drop in the crypto markets, and U.S. equities also opened lower on Wednesday. Interestingly, the low of the week for Bitcoin was reached in the hour after the CPI release at $67’500, with Bitcoin bouncing back above $71’000 on Thursday morning. U.S. equities also did not drop much further on Wednesday, with the S&P 500 closing Wednesday down roughly 1%. The U.S. Dollar Index saw a sharp increase on Wednesday, as seen in the chart below, while gold reached its new all-time high above $2’400 this morning, up more than 2.5% for the week.

The spot ETFs saw a total net inflow of $123 million on Wednesday after two days of outflows, with $223 million flowing out of the ETFs on Monday and $18.6 million on Tuesday. Wednesday not only marked the first inflow day of the week but also the day with record low outflows for GBTC, with only $17.5 million of daily net outflows.

Another interesting development in regard to the spot ETFs was the news, that Hong Kong is set to approve its first spot BTC ETFs in April. The regulators could approve these spot ETFs as early as next week, as Reuters reported on Wednesday. The funds could offer an alternative to Chinese investors who are reluctant to invest in domestic assets like real estate or stocks.

In other news, Uniswap Labs received a Wells Notice from the U.S. Securities & Exchange Commission on Wednesday. UNI, the token of Uniswap, fell more than 15% after the news came out and is down over 20% on the week. Uniswap founder Hayden Adams mentioned on X, that he thinks the fight with the SEC will likely take years and may go all the way to the Supreme Court. It’s important to note that a Wells Notice is not a formal prosecution or regulatory enforcement document. It is an early warning that the SEC will take enforcement action against suspicious projects.

A Green Thursday for U.S. equity, gold, and the dollar

While Thursday was a rather quiet day for the crypto markets, U.S. equities saw more action. The S&P 500 saw some downward action right at the market open and found a bottom around 5’140, marking the lowest level for the week so far. It then bounced back and closed the day in the green, up more than 1% from the low. U.S. equities were not alone in the rally, gold, and the U.S. Dollar Index closed in the positive as well. The rise in equities was likely fueled by lower-than-expected U.S. Producer Price Index (PPI) figures, which came in at 0.2% vs. 0.6% previously and lower than the expected 0.3%. Alex Krüger, who was our guest at the Verified Podcast by Bitcoin Suisse shared his thoughts on the relationship between the Consumer Price Index (CPI), Producer Price Index (PPI), and Personal Consumption Expenditures Price Index (PCE) here.

Market sentiment, funding rates, and spot ETF figures

Funding rates for the major cryptocurrencies have remained at low levels since the beginning of the month. As visible in the graphic below, funding rates were quite elevated on March 31st, where Bitcoin reached a temporary high around $72’000 and then corrected down to roughly $65’000 with funding rates resetting. Ever since then, prices have increased back up above $70’000 with funding rates not increasing as much. This can be interpreted as a healthy sign in the market.

While the funding rates remain in healthy territory, the crypto fear & greed index remains in extreme greed at 79 and has now been above 70 since the beginning of February, pointing to a trend to the upside when looking at the last few months. Market sentiment is always difficult to measure, and there are even reports that argue that elevated levels of greed or extreme greed are actually indicative of price increases in the medium term. The team from K33 Research published an analysis indicating that extreme scores on the index tend to be a positive indicator for the period ahead, with all extreme greed scenarios above 90 seeing positive average returns in the coming weeks and months.

When looking at the spot ETF numbers over the last weeks and months when it comes to flows and volumes, it’s interesting to observe how the flows and volumes of the spot ETFs have developed over the course of time and how they look like when mapped over the price action of Bitcoin. As one can see in the chart below, the volume of the spot ETFs yesterday reached a new monthly low, and the last time it was this low was at the end of March, when Bitcoin was trading around $52’000, just days before it broke out to the upside and reaching the new all-time high.

Our Take

This week, the crypto market started strong with Bitcoin surging over 5%, peaking at $72’777. Ethereum also saw a significant 10% increase, outperforming Bitcoin on Monday, now consolidating. On the news front, BTC ETF inflows reached record highs, and Hong Kong is set to approve its first spot BTC ETFs in April. Genesis made headlines by selling its Grayscale Bitcoin Trust shares, acquiring 32’041 Bitcoins, and BlackRock updated its list of Authorized Participants for its BTC spot ETF. Despite a brief setback triggered by slightly higher-than-expected U.S. inflation data, Bitcoin rebounded from around $68’000 to surpass $71’000 by Thursday morning. U.S. equities, gold, and the Dollar Index closed positively on Thursday. Despite minor fluctuations, market sentiment remains largely optimistic, with stabilized funding rates for major coins but still elevated for most altcoins and the fear & greed index still indicating extreme greed, reflecting bullish investor sentiment. While our overall outlook remains positive, it's crucial to recognize the potential for significant downward movements during deleveraging dips, particularly given the substantial upward trend witnessed throughout the year.

The Week Ahead

Tuesday, April 16, 2024

• CH – GDP
• CH – Retail Sales y/y

Wednesday, April 17, 2024

• U.K. – CPI Numbers y/y

Thursday, April 18, 2024

• U.S. – Unemployment Claims

Saturday, April 20, 2024

• Bitcoin Halving