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U.S. spot Bitcoin ETF fund flows appear to reflect existing market trends rather than serve as a leading indicator for future prices, according to an analysis by crypto market maker DWF Labs.
Based on an analysis of 694 trading days since the ETFs launched in January 2024, DWF Labs found net outflows in seven of eight instances when BTC fell more than 15%. In contrast, all nine instances when BTC rose more than 15% were accompanied by net inflows. The correlation coefficient between ETF flows and BTC price changes over the previous five trading days was 0.54, while the correlation with price changes over the following five trading days was just 0.03. DWF Labs said this suggests ETF flows are more closely tied to price moves that have already occurred than to future price action.
The firm added some investors may use a hedging strategy that combines ETF purchases with sales of CME Bitcoin futures, making it difficult to gauge actual investor sentiment based on ETF flow data alone.