In a recent analysis by JPMorgan, a significant change has been observed in the relationship between Bitcoin prices and the dynamics within spot exchange-traded Funds (ETFs), signaling a new phase in the interaction between these two financial instruments. The insights, derived from a comprehensive report shared with the bank’s clients by analyst Ken Worthington, underscore a developing trend that could have wide-ranging implications for investors.

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• JPMorgan’s analysis reveals a weakening correlation between Bitcoin prices and spot ETF flows, highlighting a shift in their historical relationship.
• The correlation coefficient between Bitcoin and ETFs has decreased from a peak of 0.84 in January to 0.60, indicating a move from a strong to moderate correlation.
• Record inflows of $2.4 billion into Bitcoin-related ETFs were observed last week, led by BlackRock’s IBIT and Fidelity’s FBTC, despite the changing correlation dynamics.

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JPMorgan Reports Shift in Bitcoin and ETF Correlation

Historically, the price movements of Bitcoin have closely aligned with the flow of funds into and out of spot ETFs. This correlation, however, is showing signs of weakening. As of the latest data on Wednesday, the correlation coefficient—a statistical gauge of the strength between two variables—was measured at 0.60. This figure represents a significant drop from the 0.78 noted on February 7 and an even steeper decline from a peak of 0.84 on January 31.

Worthington explains that a correlation coefficient above 0.70 typically signifies a strong correlation. The current figure, therefore, suggests a moderate correlation between Bitcoin prices and ETF flows. Despite this shift, last week witnessed a record influx of $2.4 billion into these funds, the highest in their operational history. The surge was predominantly led by BlackRock’s IBIT and Fidelity’s FBTC, which now boast nearly $11 billion in assets under management.

This remarkable inflow was likely spurred by Bitcoin’s robust performance in early February, which appeared to encourage more investments in ETFs. Nevertheless, the subsequent stabilization in Bitcoin’s price seems to have contributed to a decrease in the pace of fund inflows.

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