ETFs Taking a Hit – What’s Up?

Well, folks, grab your popcorn because the Bitcoin ETF drama just took a wild turn! According to some insider gossip from Farside Investors, institutional money decided to go on a little holiday getaway and pulled more than $826 million out of US spot Bitcoin ETFs, right before Christmas. Talk about a lump of coal in the crypto stocking!

Christmas Eve Shenanigans

On Christmas Eve alone, these ETFs saw a net outflow that ticked over $175 million. Looks like traders were in a giving mood—just not in the direction we’d like! In fact, throughout the week leading up to this festive disaster, net outflows were piling up faster than holiday decorations after New Year’s. With every trading day since December 15 ending in the red (except that bouncy little day on December 17 which saw $457 million in inflows), it’s safe to say the market was not feeling too jolly.

Why the Panic?

What’s causing this madness, you ask? Well, it appears that good old tax-loss harvesting is stirring the pot. Traders selling off their positions to realize losses for tax benefits have been in full swing this month. It’s like spring cleaning, but for your wallet!

One trader named Alek on X (the platform formerly known as Twitter) claims that most of the selling frenzy is tax-related and could chill out once the holiday vibes fade. There’s also chatter about a record options expiry looming on Friday, making traders a bit skittish about taking risks ahead of those big settlements.

Market Dynamics

Data indicates that the selling bug bites hardest during US trading hours. For instance, the Coinbase Premium—a fancy term for comparing BTC prices on Coinbase to Binance—has been spending a lot of time below zero this December, which hints that Uncle Sam isn’t buying as much Bitcoin these days.

Crypto analyst Ted Pillows summarized this situation perfectly: the US is playing the role of the biggest seller, while Asia struts around as the main buyer. This split could throw a wrench in Bitcoin’s party during rallies unless the US decides to join the dance again!

Will the Cycle Ever End?

But hold your horses, fellow crypto enthusiasts! Some traders argue that just because the ETF flows are negative, it doesn’t mean the world is ending. According to the grapevine, prices often rebound before the flows do. Essentially, after a price dip, the flows usually flatten out, paving the way for fresh capital to jump back in. So, while it seems like we’re in a liquidity lull right now, it doesn’t completely mean we’re toast.

Keeping an Eye on ETF Flows

Since early November, the 30-day moving average of net flows in US spot ETFs for Bitcoin and Ethereum has been looking grim. More money has been leaving than entering for quite a while now! But hey, there’s a silver lining! Long-term holders aren’t rushing to sell off their stocks like it’s a Black Friday sale. Sure, there’s some profit-taking happening, but nothing extreme—no signs of a dramatic end-of-the-world peak here!

What’s Next?

As we strut past the holiday season, investors will be glued to the ETF flow updates. If we see a shift toward neutral flows, it might mean prices can stabilize and possibly climb without giant new demands pushing them up. With the current combo of tax selling and those pesky options-related jitters, it seems this weakness could be just a seasonal hiccup. But be prepared! We’re likely in for a bumpy ride while US buyers sit on the sidelines, clutching their wallets.

Image credits: A free-use image from Pexels and a chart straight from TradingView for those who love numbers!