Beijing Time, December 29, 2024, Bitcoin experienced significant fluctuations before the weekly close, at one point plummeting from above $92,000 to the $86,500 range, with a 24-hour volatility close to 6%–7%. The latest batch of U.S. stock trading day spot ETF fund flows and the repricing of U.S. economic data and interest rate expectations have become the core catalysts for this round of volatility, with market sentiment quickly swinging between the "post-halving upward logic" and "high interest rates suppressing risk assets."

ETF Fund Flows and Price Linkage

● News Driven: From December 27 to December 29, multiple U.S. stock BTC spot ETFs saw continuous net outflows, with a total net outflow of hundreds of millions of dollars in a single day. Among key products, IBIT and FBTC saw a slowdown in net inflows, even turning into slight outflows, while older trust products launched earlier continue to be redeemed, creating selling pressure above the price.
● Fund Trends: Research Brief shows that the overall net inflow of spot ETFs this week is significantly lower than the previous week, with some trading days even turning from net inflows to slight net outflows, contrasting sharply with the hot phase in November and mid-December where single-day net inflows exceeded $1 billion, indicating a slowdown in incremental funds and a shift in existing funds towards short-term profit realization.
● Price Response: As ETF subscription and redemption data weakened, BTC prices were repeatedly blocked near the high range of about $95,000–$96,000 in mid-December, and as of December 29, briefly fell below $87,000, giving back a significant portion of the gains post-halving; the ETF holding curve and spot price synchronized in a high pullback, reinforcing the "fund-driven" attribute.
● Trading Structure: From the data on futures and perpetual contracts, this week BTC contract funding rates significantly declined, with some periods approaching zero or even briefly turning negative, indicating a cooling of long leverage momentum; at the same time, open interest (OI) in futures contracts decreased during the price decline, showing a certain degree of deleveraging rather than mere long-short turnover.
● Liquidity Environment: During overseas trading hours, the depth of the spot order book slightly decreased, and the impact coefficient of large sell orders on prices increased, amplifying the effect of ETF fund flows on prices in the short to medium term, making the market more sensitive to subscription and redemption data.

Macroeconomic and Regulatory Resonance Pressure

● Macroeconomic Background: Research Brief points out that the employment and inflation-related data released in the U.S. this week was slightly stronger than market expectations, raising concerns that the pace of interest rate cuts by the Federal Reserve in 2025 may not meet previous optimistic expectations. Federal funds futures indicate that the market has lowered expectations for the timing of the first rate cut and the total magnitude of rate cuts for the year, extending the high interest rate environment, which suppresses the valuation of risk assets including BTC.
● Interest Rate Expectations: After the data was released, the yield on U.S. 10-year Treasury bonds rose by several basis points, and the dollar index also rebounded, with safe-haven funds briefly flowing back into dollar assets. The rise in interest rates and the strengthening of the dollar weakened the appeal of high-beta asset allocations, leading some medium to long-term funds to choose to reduce positions or wait and see, exacerbating the downward adjustment space for BTC.
● Regulatory Trends: Brief shows that U.S. regulators still maintain a tight stance on compliance of trading platforms, custody requirements, and anti-money laundering rules. Although no new substantive punitive actions have been introduced, the high-pressure regulatory expectations have not significantly eased, limiting the willingness of traditional financial institutions to further expand their allocation scale.
● Policy Uncertainty: Legislative discussions surrounding the structure of the crypto market and the division of custody responsibilities are still ongoing, and a unified, clear legal framework has not yet been established. Institutional funds, in the absence of stable regulatory expectations, prefer to use highly liquid ETFs for short- and medium-term allocations rather than heavy assets locked in for the long term, amplifying the mechanical linkage between subscription/redemption and price fluctuations.
● Global Perspective: At the same time, some markets in Europe and Asia are still adjusting their regulatory details and tax rules for crypto-related financial products, making cross-regional arbitrage and fund flow paths not smooth, limiting the ability of global funds to hedge against regulatory fluctuations in a single market, thus making U.S. ETF fund flows more dominant over BTC prices in the short term.

Deep Logic: Fund-Driven Monocentric Structure

The recent sharp fluctuations in BTC are not an isolated technical adjustment but a result of resonance with the gradually formed "ETF monocentric drive + high interest rate suppression" structure over the past year. After the halving, the marginal reduction on the supply side remains, but incremental demand is highly concentrated in compliant ETF channels, making subscription and redemption data almost evolve into a "single remote control" for prices. When the macro-level interest rates and dollar trends shift back towards strength, institutions reassess the weight of risk asset portfolios, and ETF net inflows rapidly cool, leading to a lack of other independent incremental funds and application scenarios to support prices, resulting in concentrated profit-taking above. Meanwhile, regulatory uncertainty makes traditional institutions more inclined towards liquidity-driven short-duration allocations rather than long-term bets on BTC as a "digital gold" narrative, bringing the market closer to a trading asset driven by fund sentiment and macro fluctuations, rather than a long-term allocation asset driven by endogenous demand.

Long-Short Game: The Pull Between Faith and Reality

● Optimistic/Supporters: They believe this is a technical reshuffle and healthy correction of the previously overheated sentiment, with reasons including:
● From on-chain data, long-term holders (LTH) have limited selling pressure, with the vast majority of historical chips remaining inactive, indicating that the core faith holders have not collectively exited;
● Even if ETF net inflows weaken, cumulative holdings have still significantly increased compared to the beginning of the year, and the trend of structural fund allocation to BTC has not reversed;
● The annual new supply contraction brought by the halving is persistent, while macro and regulatory disturbances are more about rhythm and sentiment; over time, the supply-demand gap and the scarcity of digital assets will still be reassessed by the market.
● Pessimistic/Opponents: They worry that this round of adjustment is just the beginning of a larger-scale correction, with reasons including:
● Current prices have already seen multiple-fold increases compared to the end of 2023 and the beginning of 2024, whether in terms of on-chain profit chip ratios or the accumulation of long leverage in derivatives, all providing conditions for a deeper correction;
● Under the combination of continuing high interest rates + ongoing regulatory uncertainty, institutions find it difficult to significantly increase their BTC asset allocation weight, and if ETFs turn from net inflows to sustained net outflows, prices may enter a longer downward channel;
● If the U.S. or other major jurisdictions introduce stricter trading and custody regulatory frameworks, some existing participants may be forced to reduce their business or asset scale, creating a secondary impact on liquidity and market depth.

Market Outlook: The Key Lies in Interest Rates and Subscription/Redemption Rhythm

In the short term, the market will focus heavily on the Federal Reserve's interest rate path and the subsequent weeks' spot ETF subscription and redemption data as two key variables: on one hand, if the subsequent inflation and employment data decline, and interest rate expectations shift back towards easing, it will release valuation space for high-risk assets like BTC; on the other hand, as long as the ETF side returns to a stable net inflow or low volatility equilibrium state, it is expected to ease the current negative feedback loop of "net redemptions—price declines—emotional deterioration." From a mid-term perspective, whether BTC can transition from a purely fund trading target to an alternative asset that is long-term accommodated by mainstream asset allocation frameworks still depends on the clarity of the regulatory framework and whether the macro environment allows for a periodic return of risk appetite. Before that, investors need to fully realize that under the intertwined structure of ETF-driven and interest rate games, the short-term volatility amplitude and frequency of prices may be significantly higher than traditional assets.

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