First Mover Americas: Number of Bitcoin Held by Funds Hits Record High

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By Omkar Godbole

Bitcoin traded lower for the third straight day as risk aversion gripped markets on reports of Russian troops shelling the Ukrainian nuclear plant.

In traditional markets, investors ditched risky assets for the safe-haven U.S. dollar. The greenback rose to a 21-month high against a basket of major fiat currencies, including the euro, perhaps reflecting fears that the ongoing Russia-Ukraine war would have a relatively minor impact on the U.S. economy.

The immediate prospects for the risk assets looked bleak, with the U.S. nonfarm payrolls data due for release at 13:30 expected to show the jobs market continued to tighten in February, pushing wages higher. Rising wages are inflationary and would validate the Federal Reserve’s hawkish stance.

Economists on average estimated that nonfarm payrolls probably rose by 400,000 in February, according to Reuters.

“I think a strong NFP would revive calls for a more aggressive Fed and trigger another bout of risk aversion – crypto won’t be spared,” Ilan Solot, a partner at the Tagus Capital Multi-Strategy Fund, said in a Telegram chat.”

“It’s also important to watch the shape of the Treasury yield curve. I think a bear steepening of the curve – where 10-year yields rise faster than the 2-year yields would spook the markets,” Solot added.

Griffin Ardern, a volatility trader from Blofin, a crypto-asset management company, said the nonfarm payrolls release could be a non-event and the focus now is on the next week’s European Central Bank (ECB) meeting.

“The impact of the nonfarm payrolls data on the crypto market will not be huge. The interest rate market has already priced in as many as six rate hikes, and the crypto market is only pricing in more. At present, we already know that the Fed will raise interest rates, so no matter how the U.S. market changes, this thing will happen,” Ardern said in a Telegram chat.

“The most considerable influence at the moment may be the hawkishness of the European Central Bank this week. Next week, the ECB will announce its interest rate decision. We can’t yet tell what steps the ECB will take to reduce liquidity, and the crypto market doesn’t seem to be pricing in it,” Ardern noted, adding that, “any unexpected move by the ECB could trigger a fall in the market.”

Options market continues to lean bearish

Bitcoin’s options market continued to show bearish bias, with put-call skews entrenched in the positive territory.

Put-call skews measure the price of put options or relative bets relative to call options. The continued demand for downside hedges indicates lack of confidence in the sustainability of bitcoin’s recent recovery from $34,500.

The one-week, one-, three- and six-month metrics crossed above zero, in the last week of January and have remained above the neutral line ever since in a sign of persistent fears of a deeper decline.

“Positioning in crypto rarely remains for an extended period of time, but this is probably been one of the longest stretches of consistently high skew we’ve ever seen in crypto,” Split Capital’s Zaheer Ebtikar tweeted. “It’s a complete flip from the market regime even a year ago and can’t be understated.”

By Omkar Godbole

Funds appear to be accumulating bitcoin as the Russia-Ukraine crisis drives inflation expectations higher.

“The institutions are coming. Bitcoin held by funds and ETFs just made an all-time high,” Charlie Morris, CIO at ByteTree Asset Management, tweeted early Friday.

Data tracked by ByteTree Asset Management shows the number of coins held by the U.S. and Canadian closed-ended funds and Canadian and European exchange-traded funds (ETFs) has reached a record high of 851,841 BTC – an increase of nearly 10,000 BTC in four weeks

Arcane Research’s study, which filters out close-ended funds, shows bitcoin held by Canadian, U.S. and Brazilian ETFs registered inflows last month. While the European exchange-traded products and ETFs bled money for the third straight month, the outflows were substantially smaller than preceding months.

According to observers, the European funds saw outflows most likely due to increasing competition among providers of bitcoin-focused products and do not necessarily indicate weak demand.

“I think the European Union (EU) is mostly bleeding at the moment due to two separate reasons: 1) Increased “supply” of ETP products globally. More alternatives, competing in fee structures lead funds to move elsewhere. 2) Some of the EU ETPs are old, dating back to 2015, and thus follow a different structure,” Vetle Lunde, market analyst at Arcane Research, said in a Twitter chat.

“Most of the largest EU ETPs are certificate trackers, with no possibility of BTC redemption. In the last year, this has changed. Internally in the EU bunch, we see that trackers are the ones losing the most AUM, while physical ETPs are seeing net inflows. This trend is likely to persist,” Lunde added.