As a researcher with experience in the cryptocurrency market, I believe that the recent sharp drop in Bitcoin’s price on April 30 was driven by a combination of factors. The weak debut of the Hong Kong spot Bitcoin exchange-traded fund (ETF) and the waning appetite for such investments in the U.S., coupled with weak macroeconomic conditions and uncertain U.S. Federal Reserve (Fed) policy, have all contributed to this bearish outlook.
As a crypto investor, I’ve noticed that the price of Bitcoin (BTC) took a significant hit on April 30 due to the underwhelming debut of a spot BTC exchange-traded fund (ETF) in Hong Kong. The market had anticipated impressive demand of around $140 million, but the total trading volume, which included Ether (ETH) ETFs, only amounted to $12.4 million on the first day. Consequently, the Bitcoin futures premium plummeted to its lowest point in the past five months, potentially indicating a bearish trend.
Negative pressure stems from weak macro conditions and U.S. spot BTC ETF flows
It’s crucial to avoid jumping to hasty decisions regarding Bitcoin’s price fluctuations, as various aspects come into play. Among these factors is the decreased faith among investors in the Fed’s capacity to cut interest rates twice in 2024. The anticipated remarks from Federal Reserve Chair Jerome Powell following the May 1st meeting have caused cryptocurrency traders to exercise heightened caution.
Concerns have arisen among traders as U.S.-listed Bitcoin spot ETFs experienced four consecutive sessions with net outflows. Investors have been pulling their funds from the Grayscale GBTC ETF due to its high fees, and the Blackrock IBIT ETF has seen minimal activity. As a result, the interest in these investments within the U.S. seems to be decreasing, despite the Hong Kong spot ETF’s lackluster performance.
Prior to April 30, 2024, Hong Kong Stock Exchange (HKEX) had successfully introduced cryptocurrency ETFs linked to futures contracts, leading to substantial net inflows of approximately $529 million during the first quarter. Surprisingly, the launch of the spot instrument on this specific date failed to generate significant trading activity as anticipated by many market observers. Nevertheless, some financial analysts, including Eric Balchunas of Bloomberg, speculate that inopportune timing could have been a factor influencing the low volumes.
In April, the S&P 500 is poised for its first monthly decline in six months, while the yield on 5-year U.S. Treasury notes climbed from 4.2% to 4.7%. This increase signifies heightened expectations among investors for greater returns. With concerns over potential inflation and expanding U.S. debt, traders frequently sell their fixed-income assets. Consequently, the government’s need to boost market liquidity results in a decrease in bond values.
Additionally, the decrease in Bitcoin’s value to $60,172 on April 30 can be explained by investor concerns over an economic downturn. McDonald’s revealed a modest 2% increase in earnings for the same period last year, while Volkswagen disclosed a 2% reduction in sales during the first quarter of 2024.
Bitcoin options markets show a different and milder perspective
As an analyst, I’ve observed that the unpredictability in conventional markets and dwindling enthusiasm from institutional investors towards Bitcoin ETFs have led us to a point where the BTC futures premium hit its lowest mark in the past five months. Normally, monthly contracts are priced 5% to 10% higher than spot markets due to their extended settlement durations during stable market situations.
Based on Laevitas.ch’s report, the yearly cost for BTC futures contracts decreased to 7.5% on April 30th, down from 11% only a week prior. Despite the deteriorating market mood, this figure maintained a neutral stance—a promising indication given Bitcoin’s price decrease of 9.5% over the last seven days.
Examining the Bitcoin options skew is equally important to get a more precise read on market sentiment. In simple terms, a high options skew, specifically above 7%, suggests investors anticipate a potential price decrease. On the other hand, a low skew, below -7%, implies bullish expectations among investors.
As a researcher studying the Bitcoin options market, I’ve noticed an intriguing shift in the delta skew over the past week. On April 28, the delta skew stood at a significant bullish level of -7%. However, as of now, it has moderated to a more neutral 1%. This change implies that the demand for call options (buying the right to purchase Bitcoin at a specified price) and put options (selling the right to sell Bitcoin at a specified price) is currently well-balanced.
The change signifies that investors had high hopes for the Hong Kong-listed Bitcoin spot ETF at first, but were forced to recalibrate their outlook due to dismal trading activity. As a result, it’s important for traders not to be overly concerned about the decreased Bitcoin futures premium.
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2024-04-30 22:39