Matrixport’s latest daily analysis report highlights the significant success of Bitcoin ETFs, which have generated $39 billion in inflows over the past 14 months.
**Matrixport: Bitcoin ETF Success Faces Pressure from Macroeconomic Conditions**
However, as Wall Street has fully embraced Bitcoin, its price has become increasingly influenced by global liquidity, macroeconomic conditions, central bank policies, and institutional capital flows. The report notes that the strengthening US dollar has contributed to the decline in liquidity indicators and is putting downward pressure on Bitcoin’s price. Global liquidity peaked in December 2024 and the subsequent increase in the value of the dollar provides a clear explanation for Bitcoin’s ongoing correction. Looking ahead, the analysis suggests that Bitcoin could attempt to bounce back to its previous highs once the current correction is over, potentially lasting until March or April.
**Two Types of Wall Street Bitcoin Investors**
Wall Street investors entering the Bitcoin market generally fall into two categories:
– **Wealth and Asset Managers**: These investors view Bitcoin as digital gold and a long-term asset. Many hold between 100 and 1,000 BTC, making them the largest Bitcoin holders, surpassing traditional whale wallets.
– **Hedge Funds**: Focusing on arbitrage strategies rather than long-term appreciation, hedge funds profit from funding rate differences by shorting Bitcoin futures while purchasing spot Bitcoin or Bitcoin ETFs. These funds currently hold $10 billion in Bitcoin ETFs, with total ETF inflows of $39 billion, with at least 25% of these funds tied to arbitrage transactions rather than long-term bullish sentiment. Matrixport estimates that 55% or more of Bitcoin ETF inflows may be driven by hedge funds rather than those who believe in Bitcoin’s long-term potential.
**Declining Profits Lead to ETF Outflows**
Since the December FOMC meeting, arbitrage opportunities have diminished significantly, leading to a decline in trading volume. As a result, hedge funds have begun unwinding their arbitrage positions, contributing to record-breaking Bitcoin ETF outflows. These investors are now exiting unprofitable trades, further fueling Bitcoin’s ongoing correction. Matrixport’s analysis shows that Bitcoin’s price trajectory is now closely tied to macroeconomic trends and central bank policies, and these factors have become important forward-looking indicators for traders and investors.
*This is not investment advice.*
