March 2, 2024

Bitcoin ETFs Withstand GBTC Outflow with Positive Net Inflows

Despite a substantial $1.45 billion outflow from the Grayscale Bitcoin Trust ETF (GBTC) this week, net inflows into 10 US spot bitcoin funds remained mostly positive. However, there has been a notable decrease in these inflows over the past few days.

The cryptocurrency market witnessed some notable events this week as the Grayscale Bitcoin Trust ETF (GBTC) experienced a significant outflow of $598 million on Thursday and $492 million on Friday.

However, amidst this outflow from GBTC, other funds like BlackRock’s iShares Bitcoin Trust (IBIT) continued to attract substantial investments, effectively offsetting the impact of GBTC's outflows.

Data indicates that Monday witnessed a substantial net inflow of $519 million, followed by an even higher inflow of $576 million on Tuesday across all 10 US spot bitcoin ETFs. Wednesday saw a record-breaking net inflow of $673 million. However, this trend shifted, with the figure dropping to $92 million on Thursday, and on Friday, a net outflow of $140 million occurred, marking a departure from the recent norm. This fluctuation in net flows serves as a crucial indicator for investors, reflecting evolving sentiments towards bitcoin following the recent approval of ETFs by the Securities and Exchange Commission.

It's worth noting that some analysts have chosen to exclude GBTC's daily outflows from their assessments of the ETF segment due to its higher fee structure of 1.5% and the anticipated migration of investors to lower-cost alternatives. Despite this, GBTC's outflows have been substantial, totaling approximately $8.9 billion over the past seven weeks, while the category as a whole has seen net inflows of around $7.35 billion during the same period.

Alongside the significant outflows from GBTC, it's notable to observe a recent uptick in outflows from Europe's largest bitcoin ETPs over the past few days. This trend is likely attributed mainly to investors transitioning towards US ETFs, although some profit-taking may also be a contributing factor.

Since January 11th, 2024, a total outflow of $344 million has been recorded from the six major European bitcoin ETPs. Of this amount, $50 million was withdrawn on February 29th, 2024.

The surge in interest in bitcoin ETFs, which offer broader accessibility to bitcoin for a wider range of investors, has played a role in driving the price of bitcoin above $60,000 in recent days. According to Matt Hougan, Chief Investment Officer at Bitwise, the supply-demand dynamics of bitcoin are currently experiencing unprecedented levels of activity.

Thursday's net inflows into IBIT nearly matched its all-time high set just a day prior, while GBTC's outflows spiked to nearly $600 million from $216 million the day before. Speculation suggests that the surge in outflows from GBTC could be linked to Genesis, a bankrupt lender granted permission to sell roughly $1.6 billion worth of GBTC shares earlier this month.

Despite the recent surge in outflows from GBTC, there are indications that the initial wave of selling by arbitrageurs and investors seeking lower-cost alternatives might be subsiding. However, the possibility of renewed outflows remains contingent on market conditions, particularly if bitcoin experiences a correction or intensified sell-off.

U.S. spot bitcoin ETFs

In essence, while GBTC's outflows have dominated headlines, the resilience of other bitcoin ETFs in attracting investments underscores the evolving landscape of cryptocurrency investment vehicles, with investors closely scrutinizing fees and performance metrics in their decision-making process.

Notably, bitcoin ETFs in the US are now sitting on almost 4% of all bitcoin in existence, emphasizing their growing significance in the digital asset market.

At the time of writing, bitcoin's price experienced a minor setback, hovering around $62,000 after reaching a peak of about $64,000 on Wednesday.

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