BlackRock transfers a large amount of coins to Coinbase, is it dumping?

Author: Azuma, Odaily

The market is sluggish, and investors are on high alert.

In the past week, the frequent large transfers of BTC and ETH from BlackRock to Coinbase have attracted the attention of many investors. When many see the transfer activity, they immediately interpret it as a signal for a market crash and try to analyze the short-term market based on that signal. But is this methodology really reliable?

Odaily Note: BlackRock transferred a large amount of BTC and ETH to Coinbase again last night.

In the early morning of November 25, Wintermute founder Evgeny Gaevoy commented on this matter on X, stating: “This (the large transfer by BlackRock) is actually a very lagging indicator. The sell-off has already occurred in the ETF. The on-chain transfers by market makers are often the same situation.”

How should we interpret Evgeny's words? If there is a delay in the transfer, then when exactly does the real sell-off occur?

First of all, it is important to clarify that the so-called BlackRock large transfers refer to the cryptocurrency transfers from the reserve addresses of BlackRock's spot Bitcoin ETF (IBIT) and spot Ethereum ETF (ETHA) to the Coinbase Prime custody address.

According to Evgeny's supplementary introduction when answering netizens' questions, this actually occurs at a time when the ETF experiences net outflows, and large market makers engage in market making and hedging around the ETF.

Specifically, market makers will buy shares from ETF sellers, then submit a redemption request to BlackRock to exchange the ETF shares for BTC (which usually has a 1-day delay). There is no selling pressure in the subsequent stages because market makers have already completed the hedging (selling) operation simultaneously when purchasing the ETF.

In other words, the real selling pressure does not occur when retail investors see on-chain transfers, but rather when market makers are taking on ETF sell orders (which is a buy for market makers) while simultaneously selling in the external market for hedging. Since redemption circulation typically has a 1-day delay, the actual selling pressure may occur 1 day earlier.

To add a point, the above describes the market making process when the ETF experiences net outflows. Conversely, when the ETF experiences net inflows, market makers will sell the ETF to buyers while buying cryptocurrencies (such as SOL, which is currently experiencing net inflows) and sending them to the ETF issuer. Since there is no redemption time limit in this case, the lag time will be shortened, but there will still be some degree of delay.

In summary, the so-called “BlackRock large transfer” is actually just a settlement phase in the standard ETF operation process, and the selling pressure it represents generally appears before the transfer, not after. Relevant data will be presented more clearly and comprehensively in the daily monitoring of ETF inflows and outflows, and there is no need to reinterpret it as an additional bearish signal, which could lead to unnecessary panic.