In the United States, Bitcoin spot ETFs are exhibiting a decline in momentum, evidenced by Tuesday’s record-breaking daily net outflow since their introduction.
These ten funds collectively experienced a significant outflow of $326 million, equivalent to 5,117 BTC in total. This marks the second consecutive day of outflows, following a loss of $154.4 million, or 2,293.1 BTC, on Monday.
What Factors Are Contributing to the Decline in Bitcoin Spot ETFs’ Value?
The outflows observed were exclusively from the Grayscale Bitcoin Trust (GBTC) on both days, resulting in a significant loss of $1.086 billion worth of Bitcoin within the span of this week alone. Monday, in particular, marked a notably distressing day for the fund as an ETF, witnessing assets plummeting by $642.5 million.
While the iShares Bitcoin Trust (IBIT), Grayscale’s primary competitor, partially offset GBTC’s sell-off by accumulating $451.5 million in inflows on Monday, the fund experienced a much weaker performance on Tuesday, absorbing only $75.2 million. This stands as one of its poorest showings since its inception.
With the exception of Fidelity and Bitwise, no other Bitcoin ETFs saw net inflows during this period.
Bitcoin ETF Flow – 19 March 2024
All data in. Record net outflow of $326m pic.twitter.com/iBmBiMR74Z
— BitMEX Research (@BitMEXResearch) March 20, 2024
The previous instance of Bitcoin spot ETFs witnessing consecutive days of net outflows occurred shortly after their introduction in January. During that period, traders opted to “sell the news” surrounding the highly anticipated launch.
Following the ETF debut, Bitcoin’s price underwent a decline from $49,000 on launch day to $39,000 within less than two weeks. Similarly, as of the current writing, Bitcoin’s price has retraced from $74,000 last week to $64,000. This drop followed a slowdown in ETF inflows observed on Friday.
Gaining insights into Grayscale’s outflows
According to analysts at Glassnode, retracements like these are typical during Bitcoin bull markets, as investors who have held onto their coins for the long term begin to offload them once they’ve amassed significant paper gains. Glassnode asserts that since December, more than 700,000 BTC has been transferred out of the wallets of long-term holders, with 60% of these transactions originating from Grayscale.
The cyclical patterns of #Bitcoin on-chain data continue to be remarkably reliable, with this ATH break looking almost exactly like prior ATH breaks.
It makes all the sense in the world for the market to pause, correct, and/or consolidate here, and digest the move.
Sit tight.…
— _Checkɱate 🟠🔑⚡☢️🛢️ (@_Checkmatey_) March 17, 2024
James Check, the lead analyst at Glassnode, emphasized on Sunday that it’s reasonable for the market to take a breather, correct its course, or consolidate at this juncture to absorb the recent movement.
Since January 11, Grayscale hasn’t seen a single day of net inflows. As existing investors capitalize on their profits by selling their shares, prospective Bitcoin investors are less inclined to opt for the fund, considering newer alternatives with significantly lower management fees.
Eric Balchunas, an ETF analyst at Bloomberg, pointed out on Twitter that the departing investors are primarily those who invested before the ETF’s introduction, not fresh buyers.
Grayscale’s CEO, Michael Sonnenshein, revealed in an interview this week that GBTC intends to gradually reduce its management fee. Additionally, the fund has submitted filings to launch a “mini” Bitcoin ETF, anticipated to come with a reduced fee compared to its flagship fund.
