Bitcoin returns to $90,000! ETF attracts $459 million in a single week, ending two weeks of outflows

Bitcoin first returned to $90,000 on December 12 and climbed to $91,518 on January 4. As of the week ending January 2, U.S. spot ETF net inflows totaled $459 million, ending two weeks of outflows. The decline in the 10-year Japanese government bond yield has driven yen arbitrage trading inflows. Despite the fear index dropping to 25, divergence between technicals and fundamentals suggests a short-term target of $95,000.

Bitcoin Spot ETF Capital Reversal and Institutional Dominance Pattern

As of the week ending January 2, the U.S. Bitcoin spot ETF market saw a net inflow of $459 million, ending two consecutive weeks of outflows. This reversal in capital flow has become the core driver for Bitcoin’s return to $90,000. According to Farside Investors data, the weekly capital movement shows a clear institutional dominance pattern.

iShares Bitcoin Trust (IBIT) performed the best, with a net inflow of $324.4 million, accounting for 70.7% of total inflows. This ETF under BlackRock continues to demonstrate its market leadership, with strong brand effects and a solid institutional client base making it the preferred target for capital. Fidelity’s Wise Origin Bitcoin Fund (FBTC) followed closely, reporting a net inflow of $105.8 million, representing 23.1%.

Among 11 ETF issuers, 6 reported weekly capital inflows, 3 reported outflows, and the remaining 2 had zero net flow this week. The 6:3 inflow-outflow ratio indicates market sentiment is improving but has not yet become fully optimistic. Notably, inflows are concentrated in top products, with IBIT and FBTC together attracting $430.2 million, accounting for 93.8% of total inflows. This concentration reflects that institutional investors prefer large ETFs with high liquidity and low management fees.

The capital flow trend of U.S. Bitcoin spot ETFs is crucial for supply and demand balance. Inflows have driven Bitcoin up 4.06% over the week ending January 4, reaching a high of $91,518 on January 4, the highest since December 12 last year. The shift in demand for Bitcoin spot ETFs supports a short- to medium-term bullish outlook for Bitcoin prices.

Yen Arbitrage and Japanese Government Bond Yield Negative Correlation

The negative correlation between Bitcoin and the 10-year Japanese government bond yield remains solid this week, which is key to understanding the current rally. The 10-year Japanese bond yield fell from a high of 1.999% to around 1.9%, and the USD/JPY exchange rate returned to 157, driving yen arbitrage inflows into risk assets. Falling yields and a weakening yen simultaneously boosted demand for Japanese-listed stocks, pushing the Nikkei 225 index up 0.87% in the week ending January 2.

The logic of yen arbitrage trading is: investors borrow yen at low interest rates, exchange into USD or other high-yield currencies, and invest in risk assets to earn the interest rate spread. When the 10-year Japanese bond yield declines, it indicates market expectations of less aggressive rate hikes by the Bank of Japan, reducing the risk of yen arbitrage trades and increasing capital inflows into risk assets including Bitcoin.

Although the market expects the Bank of Japan to continue raising rates, the neutral interest rate remains a key factor influencing investor sentiment. In December last year, the Bank of Japan stated that the neutral rate range is 1% to 2.5%. Assuming the current rate is 0.75%, a lower neutral rate (1% to 1.25%) would imply a larger interest rate differential favoring USD over JPY, making arbitrage more profitable. Conversely, a higher neutral rate (1.5% to 2.5%) would suggest a more aggressive rate hike stance, reducing the interest rate differential and decreasing arbitrage attractiveness.

As background, Bitcoin experienced a 26% plunge from July 31 to August 5, 2024, precisely because the Bank of Japan cut bond purchases and unexpectedly raised rates, triggering a yen arbitrage unwind. The current decline in yields indicates this risk is easing, providing critical support for Bitcoin.

Extreme Fear Index and Technical Divergence

(Source: Alternative.me)

Crypto Fear and Greed Index

January 3: 29 points (Extreme Fear)

January 4: 25 points (Deepening Extreme Fear)

Historical reference: Below 25 usually signals oversold rebound

Technical Signals

· Price remains below the 50-day EMA and 200-day EMA

· Indicates a medium-term bearish trend

· Breaking above the 50-day EMA would open testing the $94,447 level

Fundamental Support

· ETF capital inflow reversal

· Easing of yen arbitrage risk

· Market structure bill review on January 15

Despite Bitcoin rising back to $91,000, the Bitcoin Fear and Greed Index remains in extreme fear territory, dropping from 29 points on January 3 to 25 points on January 4. This emotional divergence from the price is rare and often signals a potential trend reversal to the upside. When market sentiment is extremely pessimistic but prices continue to rise, it often indicates smart money is entering while retail investors are panicking and selling.

(Source: Trading View)

From a technical perspective, Bitcoin remains below its 50-day and 200-day EMA, showing a bearish bias. However, the divergence between fundamentals and technical indicators suggests a bullish trend. Breaking above the 50-day EMA would open the chance to test the $94,447 resistance. If the price continues to break above the 50-day EMA, it indicates a potential short-term trend reversal. If a reversal occurs, the psychological resistance at $100,000 and the 200-day EMA will come into play.

Market Structure Bill and Long-term Outlook

The easing of yen arbitrage concerns coincides with U.S. Congress announcing a review of the Market Structure Bill. The Senate Banking Committee announced it will review the bill on January 15, 2026, boosting market sentiment. Crypto-friendly regulatory policies could further legitimize Bitcoin and the broader crypto market, expanding the investor base.

If Bitcoin can avoid falling below $90,000, it is expected to move toward $95,000, confirming short-term (1-4 weeks) bullish targets of $95,000 and medium-term (4-8 weeks) targets of $100,000. However, downside risks remain: the Bank of Japan’s announcement to raise the neutral rate to 1.5%-2.5% could trigger yen arbitrage unwinds; hawkish Fed stance and U.S. economic data may suppress rate cut expectations in March; Bitcoin spot ETF outflows could occur. These events might push Bitcoin prices toward the November 21 low of $80,523.

Given current market dynamics, the outlook remains bullish, with a target of $150,000 in 6-12 months. The passage of the Market Structure Bill by the U.S. Senate will support this long-term goal.