As Bitcoin ETFs Gain $1 Billion in One Day, Analyst Warns of Liquidity Crunch

Demand for U.S. Bitcoin spot ETFs smashed another record on Tuesday, exceeding $1 billion of daily net inflows for the first time ever.

Outflows from the Grayscale Bitcoin Trust (GBTC) are still consistent, but have slowed to $79 million—down from $494 million a day prior. Meanwhile, BlackRock’s iShares Bitcoin Trust (IBIT) hauled a record $849 million, with smaller rivals like VanEck gathering $82 million.

[1/4] Bitcoin ETF Flow – 12 March 2024

All data in. Record day with over $1 billion of net inflow. Blackrock with a record $849 million of inflow pic.twitter.com/dKFmM3Qvaa

— BitMEX Research (@BitMEXResearch) March 13, 2024

Demand for the ETFs has proven relentless since they hit the market on January 11, gathering $11.1 billion in net inflows in barely two months. Not only has their performance shattered experts’ expectations, but they’ve also helped drive Bitcoin (BTC) to a new all-time high well before its periodic halving, which normally predates record highs.

Collectively, the ten funds now hold more than 800,000 BTC, comprising nearly 4% of the entire BTC supply that will ever exist. Should they continue to soak up coins at this rate, some analysts suspect that the Bitcoin market could experience a liquidity crisis, with available supply unable to meet overwhelming demand.

Bears can’t win this game until spot #Bitcoin ETF inflow stops.

Last week, spot ETFs saw netflows of +30K BTC. Known entities like exchanges and miners hold around 3M BTC, including 1.5M BTC by US entities.

At this rate, we’ll see a sell-side liquidity crisis within 6 months. pic.twitter.com/qwAbZJwSOl

— Ki Young Ju (@ki_young_ju) March 12, 2024

According to CryptoQuant CEO Ki Young Ju, known on-chain entities – including miners, exchanges, and whales – currently hold 3 million BTC, including 1.5 million BTC.

“At this rate, we’ll see a sell-side liquidity crisis within 6 months,” he wrote on Twitter on Wednesday. A liquidity crisis, he said, could cause Bitcoin’s “cyclical top” to exceed expectations, as buy orders flood into thin Bitcoin order books.

While ETF buying demand rages, CryptoQuant’s Exchange Netflow dashboard shows that Bitcoin exchanges have experienced stronger outflows than inflows over the past month.

“A high [flow] value indicates selling pressure in the spot exchanges (all exchanges),” a CryptoQuant spokesperson told Decrypt. “For a derivative exchange, it can indicate high volatility.”

That said, data around Bitcoin miners is a mixed bag.

On one hand, miner revenues are starting to ramp up to “overpaid” extremes as Bitcoin’s price climbs, and as such, they appear to be moving their coins on-chain—an indicator that miners may be selling some of their stash.

On the other hand, the amount of Bitcoin which held by major miners like Marathon Digital and Riot Platforms only appears to be climbing.

“Bull market will continue unless ETF inflow slows down, imo,” Ju added.

Edited by Stacy Elliott.

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