Fragile Optimism in Crypto as ETF Flows Return

Even though they were trading at around $68,000 and $1,980, respectively, at the time of writing, Bitcoin and Ethereum bounced yesterday after sharp sell-offs, with BTC reaching $71,000 and ETH climbing to $2,150 following the resumption of spot ETF inflows.

The rebound renewed speculation that BTC may have established a local floor, but traders are also bracing for today’s Non-Farm Payroll (NFP) report and Friday’s Consumer Price Index (CPI) release, two data points that could reset Federal Reserve rate expectations and determine whether the rally holds.

ETF Flows Turn Positive, But On-Chain Data Signals Volatility Ahead

In its latest market update, digital asset trading firm QCP noted that spot Bitcoin ETFs recorded $145 million in net inflows yesterday, building on Friday’s $371 million. Spot ETH ETFs also reversed course with $57 million in net inflows after three days of red.

The shift follows a period of intense selling pressure that recently drove BTC to around $60,000, its lowest level since before the November 2024 U.S. elections.

Despite the inflows, on-chain data suggests market participants are preparing for continued turbulence. For example, CryptoQuant contributor CryptoOnchain reported that on February 6, over 7,000 BTC moved from Binance to other spot exchanges, making it the second-highest daily volume in the past year.

At the same time, the seven-day moving average of flows from Binance to derivative exchanges spiked to 3,200 BTC, the highest level since January 2024. The analyst interpreted the migration of funds to derivative platforms as a sign that large holders are either hedging downside risk or positioning for sharp price swings.

Meanwhile, QCP market watchers revealed that the Coinbase BTC discount has narrowed from approximately 20 basis points to 9 basis points, signaling a moderation in U.S.-led selling. But the Crypto Fear & Greed Index remains at 9, deep in “extreme fear” territory, with the trading firm describing conditions as “thin ice that happens to be holding.”

Historical Context and On-Chain Trends

Bitcoin’s correction has drawn the broader market lower, with the OG cryptocurrency dipping below $67,000 and altcoins such as ETH, XRP, and BNB losing significant ground. The total crypto market capitalization has fallen to $2.36 trillion, shedding over $50 billion in daily value. Still, not all assets have mirrored this decline, as the likes of XMR gained 3%, while ZRO entered the top 100 following a 20% surge.

Unlike previous cycles, this downturn has avoided major systemic failures. Chainlink co-founder Sergey Nazarov pointed out on February 10 that real-world assets (RWAs) on the blockchain are expanding despite price volatility, with institutional interest sustained by technological advantages and 24/7 markets.

While the market looks for big economic changes, the increase in ETF investments provides some hope, but QCP warns that past price changes and how derivatives are set up mean traders should be careful and manage risks wisely.

The post Fragile Optimism in Crypto as ETF Flows Return appeared first on CryptoPotato.