Over the weekend, Bitcoin experienced significant volatility driven by macroeconomic events. Tariff threats towards China on Friday caused a sharp drop in risk assets, leading to Bitcoin falling below $110,000 and resulting in approximately $7 billion in crypto positions being liquidated as leverage unwound.
However, by Sunday night and into Monday, the situation improved as President Trump’s reassuring message about China calmed the markets. US markets stabilized, and China ADRs rebounded, prompting Bitcoin to recover some of its losses.
One of the key questions arising from this weekend’s events is whether the US spot ETF complex, particularly BlackRock’s IBIT, played a role in preventing Bitcoin’s price from plummeting further.
Analysis of ETF creations and redemptions reveals that leading up to the tariff threats, there was a significant inflow of cash into US spot Bitcoin ETFs. Despite the market turmoil, there were only minor outflows on Friday, indicating that ETFs may have acted as a buffer against further price declines.
On Monday, a larger outflow was observed, but IBIT continued to attract inflows, helping to stabilize the market. This suggests that the ETF market did not react uniformly to the stress, with some funds experiencing outflows while others saw inflows.
The influx of new shares into custodians prior to the market turmoil provided a cushion for ETF holders, preventing a mass exodus that could have exacerbated the sell-off. Additionally, the role of derivatives in driving market movements was highlighted, with the ETF tape providing valuable insight into market dynamics.
In conclusion, the weekend’s events demonstrated the segmented nature of the buyer base in ETFs and the importance of pre-shock inflows in shaping market reactions. Despite the significant volatility, the ETF market played a role in stabilizing Bitcoin’s price and preventing a sharp decline below $100,000.
