ETF Inflows Hit $1B on Monday, But Did They Lead or Follow Bitcoin's Rally?

On Monday, Sept. 21, nearly $1 billion flowed into bitcoin (BTC) exchange-traded funds (ETFs). However, according to CoinGlass data, BTC had already risen earlier that day due to a short squeeze.

Bitcoin hit $84,000 briefly on Monday, a level not seen since Jan. 31. The price action triggered $262.3 million in short liquidations in under an hour.

Short Squeeze Preceded ETF Fund Inflows

The sequence prompts a genuine question: which action triggered the other? Spot ETF flows are disclosed once per day and reflect trades executed during the US cash session, which begins hours after Asian and European markets have been active.

BTC's rise originated from the day's short squeeze, which had already lifted the price before any ETF purchases on the same day could occur. This order of events indicates that the derivatives market, rather than ETF demand, provided the initial impetus.

ETF Outflows Tracked Price Declines, Inflows Followed Rallies

This is not the first instance of flows mirroring price movements instead of anticipating them. According to CoinGlass, spot bitcoin ETFs saw net outflows on five out of six trading days from Sept. 9 to Sept. 16. BTC was declining during that period.

Flows only became consistently positive again on Sept. 17, when BTC's price started to rise again. Since then, cumulative inflows have exceeded $56.98 billion, and total net assets for all bitcoin ETFs now total $107.86 billion.

Fund concentration paints a comparable picture. The BlackRock iShares Bitcoin Trust (IBIT) holds 785,640 BTC, more than four times the 176,510 BTC in the Fidelity Wise Origin Bitcoin Fund (FBTC). This dominant fund appears to be capital following a trend rather than widespread, independent conviction-based purchasing.

ETF Flows May Not Start a Rally, but Can Sustain One

This does not imply that ETF demand is insignificant. To create new ETF shares, market makers must purchase actual BTC. Therefore, sustained inflows can still contribute genuine buying pressure to an ongoing rally, even if they did not begin it.

Available data cannot determine whether ETFs can independently initiate a rally. For this particular move, the evidence indicates that the futures market made the first move, with Wall Street funds arriving later.