Bitcoin (BTC) spot exchange-traded funds (ETFs) saw nearly $1 billion in inflows over the course of a single day on September 21. It happened right after, in the derivatives market during the preceding hour, short positions worth $262.3 million were forcibly liquidated, and immediately after Bitcoin’s price broke above $84,000.
Key points
In the U.S. spot market (cash session), the amount of funds that flowed into Bitcoin ETFs came to about $1 billion, but the sharp price surge that day had already begun in the derivatives market ahead of that.
The initial trigger was the ‘short squeeze’ (large-scale short selling liquidations).
When all available data are taken together, ETF demand appears to have played more of a role in strengthening and extending an already-started rally, rather than sparking it.
Bitcoin ‘short squeeze’ first
According to data from on-chain and derivatives statistics service CoinGlass, on September 21 Bitcoin briefly exceeded $84,000 and recovered that level for the first time since around January 31. The important part is the ‘sequence’ of events in reaching this price range.
Bitcoin spot ETF fund flows are tallied once per day, reflecting trades executed while the U.S. spot market is open. By the time the U.S. market opens, the Asia and Europe markets have already been trading for several hours. In other words, when the buying demand for U.S. ETFs for that day begins to build meaningfully, the downside (bear) positions in the futures market have already been largely unwound, and Bitcoin’s price had already been rising quickly.
Considering this time lag, analysts say it’s hard to conclude that at least a 21-day rally originated from ETF buying.
Due to the short squeeze on this day, a Bitcoin short-sell position worth $263.23 million was liquidated within an hour. In this process, the derivatives market effectively led the direction of price movement ahead of the spot ETF fund inflow statistics.
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The signal provided by ETF fund flows
That said, the meaning of ETF demand does not diminish. To set up new Bitcoin ETF shares, designated participants and market makers must actually buy spot Bitcoin. Therefore, even after the rally has already started, steady capital inflows into ETFs can create additional buying pressure and act as a factor supporting the upward trend.
According to BeInCrypto’s analysis, in this phase the initial catalyst came from the futures market, and the ETF was more like a structure that followed by adding momentum afterward. This doesn’t mean that ETFs can’t trigger rallies in other periods, but it suggests that at least in this case, futures moved first.
Another point to watch is the concentration of capital. **BlackRock**’s iShares Bitcoin Trust (IBIT) holds 785,640 BTC. This is more than four times the size of the 176,510 BTC held by **Fidelity**’s Wise Origin Bitcoin Fund (FBTC).
As capital concentrates in a few large products like this, the headline of ‘total ETF inflows’ can appear to be more broadly spread across actual demand distribution than it really is. It’s also worth noting that this inflow was a reversal that appeared after ETF fund flows had slowed during the preceding several trading days.
Bitcoin spot ETFs closed net outflows on 5 of the 6 trading days from September 9 to September 16. During this period, Bitcoin’s price underwent a correction. The situation changed starting September 17. As Bitcoin returned to an uptrend, ETF fund flows also flipped to positive, and net inflows continued.
Subsequent cumulative net inflows have surpassed $5.698 billion, and the total net assets (AUM) of the overall Bitcoin ETF market have reached $10.786 billion.
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