bitcoin experienced a tumultuous day yesterday, with its price briefly touching $53,000 before falling to a low of $50,820. Amid this price volatility, an unexpected phenomenon caught the attention of market analysts: a dramatic increase in trading volumes of certain bitcoin ETFs.
Bloomberg's Eric Balchunas provided a detailed account of this anomaly in X, focusing particularly on the VanEck bitcoin ETF (HODL) and its surprising increase in trading volume. He commented: “HODL is going crazy today with volume of $258 million, a 14x jump over its daily average, and it's not a big investor… but rather 32,000 individual trades, which is 60x its average.” “.
This level of activity was not only unexpected but also unprecedented, prompting widespread speculation and analysis within the financial community. The unusual trading volume was not limited to HODL alone. Wisdom Tree's bitcoin ETF (BTCW) and BlackRock's bitcoin ETF (IBIT) also saw significant increases in trading activity, albeit to varying degrees.
Balchunas noted: “BTCW is also surging, trades worth $154 million, 12 times its average and 25 times its assets across 23,000 individual trades.” However, he noted that the volume increase in IBIT, although high, did not reach the “extraordinary levels” seen in HODL and BTCW.
What's behind the sudden surge in bitcoin ETF volumes?
Addressing theories that rising ETF volume was driving bitcoin's price drop, Balchunas offered a rebuttal: “To the crowd saying 'volume needs to be sold because btc is unraveling': a) that doesn't matter. sense given how little these ETFs had in existing volume/shareholders b) plus you never see tons of capital outflows in a new ETF that is in rally mode c) there are so many other btc holders besides the ETFs! d) How can it be called 'dumping' when it is down 1% after a 20% rally in two weeks?
However, the source of this sudden and explosive increase in trading volume remains a mystery, with Balchunas speculating: “I still haven't figured out what happened. Nobody knows. Given how sudden and explosive the increase in the number of exchanges was… I wonder if some kind of Reddit or TikTok influencer recommended them to his followers. It feels like it’s a retail army.”
He also considered the possibility of market makers trading with each other, but considered this an unlikely explanation given the liquidity of other bitcoin ETFs such as IBIT and BITO.
The trading day concluded with “The Nine” achieving record daily volume, thanks to significant contributions from HODL, BTCW, and BITB, which broke their previous records. Balchunas highlighted the importance of this trading volume, stating: “For context, $2 billion in trading would put them in the top 10 among ETFs and the top 20 among stocks. Its alot.”
As the dust settles on this unprecedented trading day, the bitcoin community continues to grapple with the implications of this surge in volume on bitcoin ETFs and its potential impact on the market. The exact catalyst behind this phenomenon remains elusive, with analysts and investors alike eagerly awaiting further developments.
At the time of writing, btc fell back below the $51,000 mark and initially found support at the EMA100 on the 1-hour chart.
Featured image created with DALL·E, chart from TradingView.com
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