The unraveling of the 10 spot Bitcoin exchange-traded funds in the US continues. All ETFs recorded outflows for the first time on Wednesday, with $563.7 million leaving the funds, the biggest loss since they began trading in January, according to data from Coinglass. The latest statistics show that the number continues to decline for the first time in almost two months. Over the past four weeks, the fund has lost about $6 billion and assets under management have fallen about 20%.
BlackRock's IBIT, its most successful fund with $17.24 billion in assets under management, recorded outflows for the first time, with $36.9 million worth of shares liquidated. Flows into the fund have dried up since April 24. Meanwhile, the other two largest funds, Fidelity's FBTC and Grayscale's GBTC, lost $191.1 million and $167.4 million, respectively.
The simple reason why funds are being withdrawn is because the value of the underlying asset is declining. Bitcoin has risen 65% since the beginning of the year to an all-time high of $73,000 in March, according to data from CoinGecko. Since then, it has fallen about 20% and is currently trading around $59,000. This timeline coincides with when the spill began.
Bitcoin price corrections are caused by a myriad of factors. Since the April 19 halving, “buy the rumor, sell the news” investors have shorted Bitcoin, and miners have sold excess reserves to counter rising production costs. Additionally, the Fed's dovish fiscal policy has created further downward pressure, keeping interest rates at a 23-year high after two months of disappointing inflation data. According to the Consumer Price Index, the inflation rate as of March 31 was 3.48%, up from 3.2% in February.
Eric Balchunas, senior ETF analyst at Bloomberg, said this in addition to market conditions that are somewhat challenging for risk assets like Bitcoin. luck We've also found that recent outflows are fairly typical for ETFs in their early stages.
“I would never call this an outflow catastrophe. This is definitely a pretty tough correction, but assets and flows will zigzag up throughout the year,” he said. Instead, he stressed, the majority of investors appear to be holding for the long term, while cautious investors and tactical traders are quick to sell assets when they fall.
Balciunas also noted that Bitcoin's recent decline serves as a reminder to ETF investors that the underlying asset is volatile and not an equivalent store like gold, and that the issuer's wholesaler They suspect that some are selling gold to customers. “When you get as high as them, the descent feels like shit,” he added.
While it may be inevitable that the initial ETF frenzy will fizzle out, the fund's initial secular stagnation raises more existential questions about how the fund will continue to grow. For example, issuers currently do not have access to customers of major registered investment advisors and broker-dealer platforms such as Morgan Stanley, JPMorgan, and Wells Fargo. Additionally, Nasdaq, CBOE, and NYSE Arca all filed 19b-4s with the Securities and Exchange Commission in January to allow trading of related ETF options, but no progress was made.
In Balchunas' view, just because ETFs provide easy access to Bitcoin doesn't mean that's the whole story. Many mainstream investors still need another reason to buy tokens.
“It's like putting your band's music on Spotify. Instead of selling vinyl records, you can obviously get a bigger audience,” he said. “But the main thing you sell has to be music.”
