Understanding the impact of Bitcoin ETF inflows: the GLD ETF as training wheels

Signs of a feedback loop

Bitcoin could get a spot ETF in the US within the next few weeks or months or years... the point is that it is something bound to happen.

Now the debate is still open on the kind of impact a spot BTC ETF will have on the Bitcoin market. We will only know for sure when it actually happens. 

Meanwhile it pays to get an idea of what to expect and what metrics to track when those ETFs will go live.

So let's get our training wheels on with a similar instrument for which we have plenty of data: the GLD gold ETF.

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Understanding the impact of Bitcoin ETF inflows: the GLD ETF as training wheels

The takeaway

Estimating the impact of future flows through spot Bitcoin ETFs on BTC price is hard. But here I am, in the arena trying stuff.

Looking at the dynamic between flows in and out of the GLD gold ETF you can observe a clear pattern of:

• Gold price increases  correlating to net GLD inflows.

• Gold price decreases correlating to net GLD outflows.

There seem to be a feedback loop between the two which hinges on the fact that cash coming in or out GLD must translate to corresponding transactions in the physical gold market.

This is the kind of pattern we would expect from a spot Bitcoin ETF. Such an ETF would play the role of an accelerant to BTC price moves to the upside and to the downside once it has reached a critical mass.

What are we looking for?