(Bloomberg) — Bitcoin price volatility becomes more volatile as the digital asset hits all-time highs, and a key question now is how cryptocurrency investors in U.S. exchange-traded funds will react.
this T3 Bitcoin Volatility IndexThe index, which uses option prices to predict a coin’s expected 30-day movements, has jumped to levels not seen since the collapse of Sam Bankman-Fried’s FTX exchange. This surge suggests that the cryptocurrency market should prepare for more Bitcoin volatility.
Since its launch on January 11, the U.S. spot Bitcoin ETF has seen net inflows of $8.9 billion, prompting the digital asset to surge to a peak of over $69,000 on Tuesday. The coin’s rapid reversal from its highs resulted in intraday swings of more than 14 percent, compared with Wednesday’s 8 percent swing. As you can imagine, this type of move might unsettle some ETF investors.
Noel Acheson, the book’s author, wrote: “Hopefully they have all been warned that this could happen, but even so it may be a shock to many and unfortunately to some It can be devastating for people.” Crypto is now macro communication. “If yesterday’s move permanently scares away a lot of people who don’t want this kind of behavior in their portfolios, then that’s good news for them and the market.”
net inflow
Nine spot Bitcoin ETFs launched in early January, including BlackRock Inc. and Fidelity Investments Inc., attracted record net inflows of nearly $1 billion on Tuesday, despite a volatile session, according to Bloomberg Intelligence. On Wednesday, flows into the two funds slowed to $287.4 million.
This suggests that “Bitcoin ETF investors may be the strongest hands on the asset and are unlikely to exit during a drawdown,” BI analysts Eric Balchunas and Athanasios Psarofagis wrote in a note.
ETFs are being used as small “hot sauce” allocations to core portfolios, meaning investors will have a greater tolerance for volatility, they said. Cathie Wood’s ARK Innovation ETF is showing similar dynamics, the analysts added.
Bitcoin was little changed at around $66,945 on Thursday as speculators took a breather after a tumultuous period of trading.
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