The Factors Supporting Bitcoin’s Price Dynamics
In a recent report, Coinbase analysts highlighted key factors that could support bitcoin’s price in the coming months. They believe that bitcoin will remain well supported for the next three to six months as more institutional players adapt to the new ETF reality. The report pointed to the significant net inflows into existing U.S. spot bitcoin ETFs as an indication of institutional participation supporting bitcoin’s price dynamics. Year-to-date, there have been impressive net inflows totaling over $4.2 billion. The Block’s Data Dashboard also shows daily fund flows remaining net positive for over two weeks.
Comparison with Gold ETF
The Coinbase report drew parallels between the newly launched bitcoin funds and historical flows into Gold ETFs. It noted that bitcoin ETFs have attracted more net inflows in their first month than State Street’s SPDR Gold Shares ETF, which is considered one of the most successful ETF launches on record. Bloomberg reports that BlackRock’s IBIT and Fidelity’s Wise Origin Bitcoin Fund are among the top 0.1% of new ETF launches over the past 30 years.
Bitcoin Surges Despite Strengthening DXY
Despite a stronger U.S. dollar index (DXY), bitcoin has experienced significant price appreciation. Historically, a stronger dollar disincentivizes investment in risk assets like bitcoin. However, investors may be drawn to higher yields or lower volatility in dollar-denominated assets during periods of a strengthening DXY. Since the beginning of February, the DXY has increased by almost 3%, while bitcoin has surged by almost 24%. Despite this, the GM 30 Index, representing the top 30 cryptocurrencies, slipped 0.26% in the past 24 hours.
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