US ETFs’ Record Inflows, Bitcoin Weekend Volatility, & Crypto Mining Machines on Sale
It’s the weekend, and the crypto market is volatile yet again.
For the past few weeks, weekends have been bearish, and the same is true this time as Bitcoin price trades around $35k, as it continues to chop between the $32k and $42k range. Eth is also down at $2,400, and the total market cap is around $1.5 trillion.
Amidst this, on Friday, Scott Minerd, the CIO at Guggenheim Partners, decided to impart knowledge with which the crypto market has already been familiar, having seen for weeks now.
Minerd, known in the crypto community for his bad takes on Bitcoin price, warned crypto investors of a volatile weekend.
The crypto market would have liked to share similar warnings about the traditional stock market as the US Dollar index took a spike to 90.44, but unlike crypto, they are not open 24x7x365.
Crypto investors be warned: be prepared for a volatile holiday weekend.
— Scott Minerd (@ScottMinerd) May 28, 2021
The latest slump in Bitcoin price isn’t really affected by anything, although a lot is still going on in the market. With volume low, especially over the weekend, it is easier to move the prices.
According to Ian Rogers, chief experience officer at Ledger SAS, volatility is a feature and not a bug for cryptos; as he explained in his interview with Bloomberg, during volatility, people go from Bitcoin and into stablecoins and back into BTC when they think the cryptocurrency has bottomed.
“If you're investing in cryptocurrency, it's a long term game,” which means a time horizon of four years as crypto as an asset class overall “will grow for the foreseeable future,” he added.
The Money Flow
While China remains a risk to the price in the short term, there is no clarity from the country on banning crypto mining. Chinese state media, meanwhile, is collectively launching attacks on highly leveraged futures and quoting screenshots of Binance futures.
Additionally, miners remain cautious and have been moving overseas. Miners are also selling their equipment that has the Antminer S19’s cost drop from their previous highest point of $12,000 to now a minimum of $8,000, and continue to decline as more and more machines are being listed for sale.
This selling is by miners who “are worried about the government's subsequent anti-mining policy,” noted local publication Wu Blockchain.
Bitcoin hash rate, however, isn’t showing any notable weakness, currently at 142 Th/s, down from about $171 Th/s all-time high from May 13, as per Bitinfocharts.
At the same time, US President Joe Biden is preparing for a big $6 trillion budget for the next fiscal year, sending the valuation of risky assets even higher.
Six trillion dollars?
This is good for Bitcoin.
— Edward Snowden (@Snowden) May 28, 2021
All the money printing due to loose monetary policy has led to investment into US exchange-traded funds (ETFs) to rise to record levels, $324 billion in the first four months of this year, as per Refinitiv data. This is an increase of 180% from the same period last year.
The Joe Biden administration’s proposal to increase the U.S. capital gains tax also fuelled interest in ETFs. Besides tax liabilities, what makes ETFs attractive are their lower fees, benign passively managed, and redemption mechanism called “in-kind transfer,” which doesn’t involve paying cash but rather delivering the asset precluded from being taxed.
“The relaxation of the exemption rule requirements has allowed ETFs to be structured to cover narrower segments of the market such as marijuana stocks, ‘high conviction’ stocks, crypto-focused, etc.,” said Warren Ward, founder of financial planning firm Warren Ward Associates. And when one can have a basket, why would one choose a single stock, he added.
This growth can also be seen in Bitcoin ETFs and Ether ETFs in Canada, and such products in the US are expected to have similar spectacular results, but the SEC is yet to approve a single one.