The Purpose Bitcoin ETF, a Canadian-based fund, attracted more than $38 million in Bitcoin (BTC), Tuesday. This is its third largest daily inflow.
Glassnode data shows that investors invested about 1,054 BTC in the fund. This is slightly less than the Dec. 6, 2021 inflows. The capital injection was still almost half of the amount that was entered the Purpose Bitcoin Exchange Fund on its debut on February 22, 2021, which is over 2,250 BTC.
ETFs for Bitcoin: Purpose Source: Glassnode
Are investors buying the dip?
ETFs, which are bitcoin exchange-traded funds, mimic the spot price performance of the cryptocurrency. This allows investors to gain exposure to its market without actually holding any BTC. ETF backers purchase real Bitcoin using the money they receive from investors, thus becoming an proxy method for measuring the interest of the market in the cryptocurrency.
Markets believe that inflows to funds increase the prices of underlying assets by attracting more return-chasing investor. In a perfect world, Bitcoin’s price would move in the same direction that fund flows.
Despite Bitcoin’s recent price corrections, the higher inflows were evident. Bitcoin traded at $37,000 on February 3, just three months after reaching a record high of $69,000.
Daily chart of BTC/USD price. Source: TradingView
However, during the same time, the total amount BTC in the Purpose Bitcoin ETF reserve has increased from almost 24,100 to just over 31,000. This suggests that Purpose Bitcoin ETF investors have been buying Bitcoin dip.
People bought the etf to get more coins.
— tiredfornow (@tiredfornow), February 2, 2022
However, the story is different if you take all Bitcoin funds into account.
Play requires careful accumulation
CoinShares published a report on January 31 that showed that Bitcoin funds saw a weekly inflow worth $22 million of BTC. This was as of Jan. 28, according to CoinShares. In comparison, the total amount of BTC that has been exited from the market in 2017 was $132 million.
The total assets under management of all Bitcoin funds fell to $29 billion in January, which was the lowest level since July 2021. However, they recovered to more than $31 billion.
CoinShares wrote that “We are witnessing an increasing price sensitivity to monetary policy statements with the recent FOMC meeting having a prompt intraday price response.” They also noted that inflows totaling $19 million were recorded by all digital assets in the week ended Jan. 28.
Although it is small, it suggests that investors are starting to add to their positions at these low prices.
Flow by digital assets Source: Bloomberg, CoinShares
Senior ETF analysts at Bloomberg Intelligence Eric Balchunas and Athanasios Pasarofagis noted that Bitcoin ETFs will continue to attract inflows into 2022 while investors wait for the United States Securities and Exchange Commission (USSEC) to approve a spot Bitcoin ETF.
Spot Bitcoin recovery stalls
Spot BTC is being threatened by a correction as Bitcoin ETFs are indicating cautious accumulation.
Related: Willy Woo – ‘Peak Fear’, but on-chain metrics indicate it’s not an bear market
BTC/USD reversed its downward trend after it failed to recover $40,000 on February 1. A downward trendline was used as resistance by the price, and it also served as an upper trendline for the descending channel.
BTC/USD daily chart with descending channel. Source: TradingView
This increased Bitcoin’s potential for a bearish momentum towards the channel’s lower trendline. Bitcoin is currently at $30,000, which is a strong support level.
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