Predictive Strength
unravel
unravel
unravel
Predictive Strength
Measures the net flow of capital into ETFs.
ETF flows act as a real-time gauge of institutional confidence. Sustained inflows signal bullish positioning by large investors (e.g., BlackRock, Fidelity), while outflows often precede bearish trends.
Each $1 of ETF inflow injects liquidity into the market, reducing bid-ask spreads and slippage. Analysis shows that ETF-driven liquidity enables smoother large transactions (e.g., 10,000 BTC trades) with minimal price impact. Conversely, outflows tighten liquidity, exacerbating volatility during sell-offs.
ETF flows create self-reinforcing cycles. Inflows attract more capital by validating bullish narratives, while outflows can spark deleveraging cascades.
ETF Net Flow data is sourced by tracking daily/monthly changes in shares outstanding and net asset value (NAV), adjusting for price movements to isolate pure capital inflows/outflows. This calculation typically involves comparing the current period's AUM changes against historical averages to create a normalized index. The final metric reflects relative capital movement intensity rather than absolute dollar values.
To understand a predictive factors predictive power, we create a simple long/short strategy and simulate its past performance (with daily rebalancing):
The strategy is rebalanced daily, on a continuous basis. There are 0.5% transaction costs applied on each position adjustment.
unravel
Predictive Strength
Predictive Strength