Is The Link Broken? New Analysis Shows Bitcoin’s Price Unmoved By ETF Liquidations

The evolvement of Bitcoin has led to Bitcoin’s trajectory being linked to several other markets, whereby the stance of certain markets could hint at where BTC is headed.

However, according to the latest data, this phenomenon is changing specifically for the correlation of Bitcoin’s price to exchange-traded fund (ETF) movements.

The latest observation from a CryptoQuant author on the QuickTake platform has revealed that BTC ETF, particularly the ETC Group Physical Bitcoin (BTCE), an investment fund based in Germany, which has shown a historical pattern of syncing with Bitcoin’s price movements, is now seeing a divergence in correlation.

The analyst, Joao Wedson, disclosed that historically, increases in BTCE’s Bitcoin holdings have often aligned with substantial price rallies in Bitcoin itself.

For instance, a significant accumulation in the fund’s reserves from 0 to over 23,480 BTC in 2020 coincided with Bitcoin’s surge to its first historic peak in April 2021. Conversely, a reduction in holdings has typically indicated a forthcoming drop in Bitcoin prices.

Recent Trends and Changes in Fund Behavior

“The historical correlation between BTCE and the Bitcoin price has shown a consistent pattern, where changes in the fund’s reserves generally precede movements in $BTC price.” – By @joao_wedson

Link https://t.co/59rWi28opD pic.twitter.com/bKRI4TfePP

— CryptoQuant.com (@cryptoquant_com) August 14, 2024

However, a shift in this pattern has been observed since January 2024. Despite the fund’s Bitcoin reserves decreasing from a peak of 27,980 BTC to below 17,000 BTC, the anticipated decline in Bitcoin’s price hasn’t materialized to the extent predicted by past trends.

This divergence suggests a potential decoupling of the fund’s activities from direct Bitcoin price movements, marking a change in how BTC’s market relation with this product might be interpreted.

Wedson revealed that this observation is evident in the 30-day variance of the BTCE fund analysis. This analysis showed that positive variances in the fund’s reserves were typically associated with Bitcoin price rises, and negative variances correlated with price drops.

The recent period, however, stands as an exception to these findings, with Bitcoin’s price rising despite continued sell-offs from the fund.

Bitcoin is trading for $59,144 at the time of writing, following a 3.6% dip in the past 24 hours. According to the latest report, this decline comes after the US inflation fell to 2.9%, the lowest since 2021.

Amid this price performance, Economist and Trader Mikybull Crypto on X, has pointed out the potential rally for Bitcoin.

This rally, according to the analyst is based on the global liquidity index breaking out of a 2-year resistance. Mikybull Crypto noted:

The BTC correlation with the global liquidity index is quite strong. This indicates that Bitcoin strong and massive rally is looming.

Featured image created with DALL-E, Chart from TradingView