According to Bloomberg, Bitcoin investors in Asia are reportedly responding to the impact of automated trading protocols on US spot ETF flow data, which has experienced significant volatility in the region.
Data on the daily demand levels for Bitcoin spot ETFs are disseminated throughout the entire cryptocurrency market during the Asian trading session after the US stock market closes. On Tuesday, digital assets experienced the most severe decline in a month in the morning Asian hours as fund flow data indicated investor withdrawals.
The flow of funds for Bitcoin spot ETFs between the US and Japan, source: Coinglass
Shiliang Tang, President of proprietary trading firm Arbelos Markets, stated that this flow pattern helps explain why market returns during the Asian session were “particularly strong in February and early March, but not as strong by late March”.
As algorithmic protocols sell off Bitcoin, this could have a cascading effect on the derivatives market. Coinglass data shows that approximately $354 million worth of cryptocurrency long positions were liquidated on Tuesday, marking the highest record in about two weeks.
Charlie Morris, Chief Investment Officer at ByteTree Asset Management, wrote in a report that Bitcoin accounts for approximately 5.5% of holdings in the entire ETF space, compared to just 1% for gold, “therefore, ETF flows are more important for Bitcoin than for gold”.