Matrixport: Bitcoin Adjustment Driven By Hedge Funds, Correction May Continue Until March Or April
In Brief
Matrixport released its latest analysis, suggesting that once this correction runs its course—potentially lasting until March or April—Bitcoin could attempt to rebound to previous highs.
Cryptocurrency service provider Matrixport released its latest analysis, highlighting the success of Bitcoin exchange-traded funds (ETFs), which have attracted $39 billion in inflows over the past fourteen months. However, with Wall Street’s increasing involvement in Bitcoin, the cryptocurrency is becoming more influenced by factors such as global liquidity, macroeconomic conditions, central bank policies, and institutional capital flows.
One key observation is that the strengthening US dollar is reducing liquidity, which may exert downward pressure on Bitcoin prices. The peak of global liquidity, driven by a surging US dollar in late December 2024, helps explain the ongoing correction in Bitcoin’s value. Looking ahead, the report suggests that once this correction runs its course—possibly lasting until March or April—Bitcoin could attempt to rebound to previous highs.
Understanding macroeconomic trends and central bank policies provides valuable insights into Bitcoin’s future price movement, a crucial factor as Wall Street investors, who closely track these macroeconomic elements, have become more active participants in Bitcoin trading.
Matrixport identifies two distinct types of Wall Street investors entering the Bitcoin market. Wealth and asset managers are viewing Bitcoin as “digital gold” and a long-term investment. This group, represented by wallets holding 100-1,000 BTC, has now become the largest segment of Bitcoin holders, surpassing the dominance of whale wallets that once led the market.
On the other hand, hedge funds are entering Bitcoin with a focus on non-directional returns through arbitrage strategies, rather than long-term price appreciation. When cryptocurrency traders become bullish, they often use leverage to take futures positions, which drives up funding rates. This creates an arbitrage opportunity for hedge funds to short Bitcoin futures while buying Bitcoin spot or Bitcoin ETFs simultaneously, profiting from the funding rate spread.
These hedge funds currently hold $10 billion in Bitcoin ETFs, contributing to a total of $39 billion in ETF inflows. This suggests that approximately 25% of Bitcoin ETF capital is involved in arbitrage trades. Based on Matrixport’s analysis, it is estimated that 55% or more of ETF flows likely originate from hedge funds using arbitrage strategies rather than long-term investors who believe in Bitcoin’s potential for sustained growth.
Following the decline in yield opportunities since the December Federal Open Market Committee (FOMC) meeting, along with a drop in trading volumes afterward, it is unsurprising that hedge funds are unwinding their arbitrage positions. This trend is reflected in the record outflows from Bitcoin ETFs, as these funds exit trades that have become less profitable.
Bitcoin Hovers Above $80,000 Mark Amid $491M Market Liquidations
As of the latest update, Bitcoin is priced at $81,296, reflecting a 5.13% decline over the past 24 hours. During this period, the cryptocurrency reached a low of $78,411. This decline coincided with market liquidations totaling approximately $491 million in Bitcoin as per Coinglass data. Despite this drop, Bitcoin’s market dominance remains at 59.66%, suggesting that altcoins are under greater pressure.
The broader cryptocurrency market has also experienced a downturn, losing nearly 4.48% in value over the past day, with its total market capitalization falling to $2.72 trillion. Additionally, market volume decreased by 17.48%, dropping to $179.77 billion, as reported by CoinMarketCap. These figures indicate that investors are remaining cautious amid ongoing volatility in the market.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
