Why Is Bitcoin Price Not Going Up?
In a recent analysis, Fred Krueger, the former founder and chairman of Traffic Marketplace, offered an explanation for the paradoxical situation where the Bitcoin price has fallen despite the influx of over $5 billion in new assets through Exchange-Traded Funds (ETFs) by BlackRock and Fidelity. According to Krueger, arbitrage traders played a significant role in this scenario. In late June 2023, in anticipation of the ETF launch, these traders engaged in Long GBTC, short BTC Futures trades. This strategy initially had a negative impact on Bitcoin’s price but was masked by the overall market rally at the time.
Changes in Arbitrage Strategies
With the approval of the ETFs, arbitrage traders shifted their strategies. They sold GBTC for BTC and bought Futures, creating a market-neutral action. This led to a decrease in open interest on the Chicago Mercantile Exchange (CME). Additionally, about $1.5 billion of the new ETF demand was recycled from GBTC in tax-neutral accounts, representing a reallocation of existing investments rather than fresh capital entering the Bitcoin market.
External Market Pressures
An external factor that influenced the market reaction was the selling of $1 billion worth of GBTC by Sam Bankman-Fried (SBF), founder of FTX. This selling, along with other factors such as the unwinding of arbitrage positions, created a perception that the ETFs were a failure. However, Krueger argues that the ETFs actually generated net new buying pressure of over $3.5 billion.
Conclusion: Bullish Outlook
Krueger concludes his analysis by expressing a bullish outlook for Bitcoin. He predicts that over the next 30 to 60 days, the new ETFs could result in $4 to $6 billion in inflows, potentially moving the market up to 50% or to $64K. At present, BTC is trading at $43,054.
Hot Take: Bitcoin Price and the Role of Arbitrage Traders
In a recent analysis, Fred Krueger provides insights into the factors influencing the Bitcoin price despite the introduction of ETFs by BlackRock and Fidelity. He highlights the role of arbitrage traders and their changing strategies. While these traders initially had a negative impact on Bitcoin’s price, their actions became market-neutral with the approval of the ETFs. Krueger also emphasizes that external market pressures and the reallocation of existing investments affected the overall market reaction. However, he remains bullish on Bitcoin’s future, predicting significant inflows over the next few months that could drive the price up by 50% or to $64K.
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