Automated Trading Bots Trigger Market Swings in Asian Bitcoin Market

Investors in Asia are experiencing market turbulence due to automated trading bots responding to data from spot Bitcoin exchange-traded funds (ETFs). These bots have amplified volatility, leading to significant price swings in Bitcoin during Asian trading hours.

Automated Trading Bots Spur Volatility in Asian Bitcoin Market

April 2, 2022

Singapore - The introduction of automated trading bots in the Asian Bitcoin market has sparked concerns over heightened market volatility, according to a recent report by Bloomberg.

Role of Automated Bots

"These bots can crawl and trade automatically based on real-time data," explained Shiliang Tang, president of Arbelos Markets. "This activity likely contributes to the current market fluctuations."

Following the closure of U.S. stock trading during Asian hours, data on daily demand levels for spot Bitcoin exchange-traded funds (ETFs) circulates through the cryptocurrency market.

Bitcoin Price Drop and Market Impact

On April 2, Bitcoin plunged during the Asian trading session, coinciding with reports of investor withdrawals from spot Bitcoin ETFs. According to CoinGecko, Bitcoin's price plummeted to $64,650, a loss of approximately 6% within a day, triggering wider market volatility.

Spot Bitcoin ETF Flows and Market Corrections

The approval of spot Bitcoin ETF applications by the U.S. Securities and Exchange Commission (SEC) in early January injected $12 billion in net inflows into the market. However, subsequent outflows have contributed to Bitcoin's current decline of nearly 10% from its all-time high.

On April 1, spot Bitcoin ETF flows once again turned negative, with significant outflows from Grayscale and a smaller outflow from Ark 21Shares. Farside Investors data revealed a combined outflow of $85.7 million, equivalent to 1,200 BTC.

Bloomberg's ETF analyst, James Seyffart, expressed surprise at the magnitude of the outflows, noting that he had anticipated a slowdown.

Market Outlook

Despite the recent corrections, Galaxy Digital CEO Michael Novogratz maintains a positive outlook. He anticipates potential approval for spot Ethereum ETFs by the SEC later this year.

Market Implications

The growing influence of automated trading bots highlights the need for enhanced market surveillance and risk management practices. Volatility driven by automated trading can introduce uncertainty and instability, particularly in emerging asset classes like cryptocurrencies.

As the cryptocurrency market evolves, it is crucial for investors to exercise caution, conduct thorough research, and adopt appropriate risk management strategies to mitigate potential losses.