Are ETFs dominating Bitcoin prices? This might be the most critical reason for this round of decline.

Yesterday, Bitcoin continued to plummet, hitting a low of 59,100, reaching the lowest point from June 5th. The sell-off was timed with the opening of the US stock market, around 9 PM, which clearly indicates institutional dumping.

Then I checked the ETF data, and sure enough, there was a massive outflow of ETFs, with $469 million flowing out yesterday. Among them, IBIT (BlackRock) saw an outflow of $239 million, and FBTC saw an outflow of $120 million.

Why does an outflow of $400 million cause such severe damage to the overall market?

I looked into the 24-hour spot trading volume of the largest exchange. Binance's 24-hour spot trading volume was $1.89 billion. Round-trip, that means sell-side volume is roughly $900 million. The ETF outflow of $469 million accounts for nearly half of that trading volume. Although Binance is just one exchange and there are others, Binance is currently the largest, and the others combined are probably only about as much as Binance's volume.

So, these ETF sell orders account for almost 25% of the total market sell pressure. Plus, there are many retail investors and market makers doing short-term trades. Therefore, the real capital dumping from these ETFs can completely dominate market direction!

There's also evidence showing that BTC ETFs currently have a huge impact on Bitcoin's price. The chart below shows the current Bitcoin ETF holdings. The peak of Bitcoin asset management scale was $165.1 billion; now it's $82 billion, a 50% decrease. Meanwhile, Bitcoin's price has also dropped from a high of $120k to the current $60,000, a 50% decline.

The current ETF holdings are as follows: IBIT holds 768.3k BTC, FBTC holds 180k, GBTC holds 138.9k, and other smaller holdings. In total, it's about 1.17 million BTC.

This 1.17 million BTC is actually quite significant because the total wallet balance across all exchanges is roughly 2.5 million BTC. So it's safe to say that these 3-4 million BTC affect the coin's price. The rest are either in cold wallets or held by MicroStrategy (850k BTC—though large, they aren't selling), which don't actively influence the current price.

Therefore, these ETF-held bitcoins have a massive impact on the market, since they currently account for about 30% of the circulating supply. At the peak, they may have accounted for over 50%.

So, when will the decline stop? It depends on when the US ETFs stop selling or start buying. Of course, ETFs also reflect retail sentiment. Before ETFs existed, retail investors were also involved, but there was no intuitive indicator to track it. Now that we have ETFs, we can clearly see changes in retail sentiment. That's why this cycle's Bitcoin movements are so rapid—once it drops, it drops hard and fast, much quicker than before. Therefore, ETFs in this cycle act as an accelerator for Bitcoin. I think it has both pros and cons. The downside is the current situation: once a bear market hits and prices fall, many retail investors will cut losses and exit, and the ETF data accelerates that. The upside is similar: when the market turns bullish, it will also accelerate.

Now, the prices of these ETFs are almost back to those of 2024. Of course, Bitcoin's price has also returned to where it was when ETFs were first approved in 2024. In 2024, Bitcoin consolidated around $50,000 for nearly a year, and the volume exchanged there was substantial. So there is reason to believe that support at this level is sufficient. Moreover, if ETFs continue to decline or see outflows, their proportion will decrease, and their impact will weaken. So I think the current price may not be the absolute bottom, but it's close to it.

Lately, many friends have been saying that Bitcoin and Ethereum are "old guard" assets. When an asset is in continuous decline, it will naturally be looked down upon. It's the same old logic: imagine you're a US retail investor. On one hand, you have crazy gains in Micron, SanDisk, and NVIDIA-related stocks, up 10% a day. On the other hand, you have a Bitcoin ETF dropping 5% a day. You would definitely sell your Bitcoin and chase semiconductor stocks.

Because current "attention" is focused on semiconductors. Money follows where the heat is; capital is determined by position. If something is hot, capital will "congregate" there. Based on current market conditions, the semiconductor wave will last at least six months or more. So if market sentiment doesn't shift, even if the four-year cycle arrives, no one will be willing to buy Bitcoin or ETFs.

Therefore, in crypto, you either need patience or you chase the hot spots. There's no absolute right or wrong—just strategy. The advantage of chasing semiconductor hot spots is immediate gains, but the returns might be just so-so since they've already run up a lot. If you don't chase hot spots, you pay the price of time. It's up to you to decide.