Small trend reversal for Bitcoin ETFs

Yesterday, the ETF su Bitcoin spot recorded overall net outflows of approximately 85 million dollars. 

This is a small trend reversal, given that the three previous sessions had recorded daily inflows of several hundred million dollars. 

Something like this, however, had already happened on April 30th, so it is not to be considered a worrying signal. However, since Powell will speak today, there is a bit of fear. 

The ride of Bitcoin ETFs

Starting from mid-April, a long series of stock market sessions has been recorded with overall net inflows on spot BTC ETFs in the USA. 

The daily peak of this period was reached on April 22, above 900 million, when the price of Bitcoin broke away from $85,000 and started heading towards $90,000. 

Note that since then it has not fallen below $90,000 again.

In the last twenty days, there have been only two negative sessions with net outflows overall, both, however, below 100 million dollars daily, while all other sessions closed with net daily inflows overall exceeding 100 million. 

In fact, excluding the 173 million on April 29, all other sessions closed with more than 300 million dollars of daily inflows, and also excluding April 21, all others exceeded 400 million. 

It was therefore a sort of triumphant ride, also and above all due to the fact that the idea has spread that the relative bottom of this period has now been surpassed. 

Yesterday’s fears trigger outflows from Bitcoin ETFs

Although the single data from yesterday is not enough to state that a new bear trend has begun, it is, however, a clear sign that there is some fear.

This fear has also been reflected on the price of Bitcoin, which dropped in recent days from $98,000 to less than $94,000, but last night it already returned above $96,000.

Such fears are linked to what the Fed might say today, while the rebound last night was most likely triggered by the rumor that political talks could soon begin between the US government and the Chinese government regarding possible trade agreements to overcome the current stalemate caused by tariffs.

That does not change the fact that today the Fed could move the markets. 

The problem of the Fed

Today, almost certainly, the Fed will announce that it has not cut interest rates. 

This hypothesis has already been widely priced in by the markets, which, however, are still very uncertain, particularly about the future evolution. 

The key point is always the monetary policy of the central bank, and in particular the possible future path of rate cuts. 

At this moment, the markets are pricing in that even in June, the Fed will not cut rates, and that by the end of the year, there will be only three cuts of 25 basis points. 

However, if from Powell’s words, and from the so-called Fed dot plot, a different strategy were to emerge, the markets could react instantly with a broad and rapid repositioning. 

The problem is that inflation in the USA for some months now has not been decreasing significantly, and to this is added the fact that the tariffs introduced by Trump will end up increasing prices.

In such an uncertain framework, the Fed might not have sufficient information to plan further rate cuts, thus deciding, for example, to pause the path of cuts until it has clear positive information on the matter. 

One of the worst-case scenarios considered possible is that of an increase in inflation in the coming months, something that could even paradoxically force the Fed to raise rates again. However, the markets seem more inclined to believe the best-case scenario is likely, namely that Trump will eventually remove the tariffs within a couple of months. 

The strength of Bitcoin

In such a context, the triumphant ride of Bitcoin ETFs stands out even more. 

Behind this phenomenon is certainly the fact that the markets seem to want to bet on a Trump reversal on tariffs in the coming months, and therefore also on the resumption of the path of interest rate cuts by the Fed. 

But it is possible that they are also betting on another factor: the further weakening of the dollar. 

We must not forget that in the medium/long term, the trend of Bitcoin’s price is inversely correlated to that of the Dollar Index (DXY). 

The fact is that the USA’s trade balance with foreign countries is at all-time historical lows. Trump wants to significantly reduce the trade deficit, and this can be done either by reducing imports or increasing exports.

With a strong dollar, it is inevitable that imports will grow, and exports will decrease, and the dollar has been strengthening for more than 15 years now. 

To limit imports, Trump introduced tariffs, but this solution not only also produces strong negative consequences, but in reality, for now, it is not even working. However, it was the only way to intervene immediately on the problem. 

Instead, it would be much better to favor exports, and for this a dollar is needed that is decidedly weaker than it is now. 

If Trump manages to significantly weaken the dollar, this problem will be resolved, and at the same time, the trend of Bitcoin’s price could greatly benefit from it. 

It should be remembered that since taking office in January, Trump has already caused the Dollar Index to drop from about 110 points to less than 100, and he might have in mind to bring it not only to the lows of recent years (95 points) but perhaps even well below this latter threshold.