Vulnerable optimism in crypto as ETF flows return

Spot Bitcoin ETFs added $145 million, Ethereum saw inflows of $57 million, signaling fragile optimism after a sharp crypto sell-off.

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

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

ETF flows turn positive, but on-chain data points to future volatility

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

Despite the inflows, data from the chain suggests that market participants are preparing for continued turbulence. For example, CryptoQuant contributor CryptoOnchain reported that on February 6, more than 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 derivatives exchanges rose to 3,200 BTC, the highest level since January 2024. The analyst interpreted the migration of funds to derivatives platforms as a sign that large holders are either hedging downside risk or positioning themselves for sharp price swings.

Meanwhile, QCP market watchers revealed that the Coinbase BTC discount has narrowed from around 20 basis points to 9 basis points, indicating a moderation in US-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 take hold.”

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Historical context and trends in the chain

Bitcoin’s correction has dragged the broader market lower, with the OG cryptocurrency falling below $67,000 and altcoins like ETH, XRP and BNB losing significant ground. The total market capitalization of cryptocurrencies has fallen to $2.36 trillion, losing more than $50 billion in daily value. Yet not all assets have reflected this decline: stocks like XMR rose 3%, while ZRO entered the top 100 after a 20% rise.

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

As the market looks to major economic changes, the increase in ETF investment offers some hope, but QCP warns that past price changes and the way derivatives are set up mean traders need to be cautious and manage risk wisely.