Published: July 17th, 2024
Bitcoin exchange-traded funds (ETFs) saw inflows of USD 1.35 billion last week as BTC-devoted funds chalked up their fifth-best week for the year to date.
New data from CoinShares shows that close to USD 1.44 billion in assets found their way into exchange traded crypto funds generally, bringing this year’s total to an all-time high of USD 17.8 billion, well in excess of 2021’s previous figure of USD 10.5 billion.
Bitcoin pulled in the lion’s share of crypto fund inflows, which is not surprising. Neither is the fact that USD 1.3 billion of the total inflows to crypto funds came from American investors. The rise has been steady, with last week's inflows tripling the USD 441 million mark achieved just seven days before. That was when crypto fund inflows turned positive again after three weeks of losses.
An analysis from Farside Investors echoes the CoinShares finding, showing that US spot Bitcoin ETFs saw a full week of daily inflows last week, posting more than USD 310 million in net inflows on Friday, July 12th, 2024 alone. That was the highest level seen in over a month.
CoinShares' numbers also have Ethereum racking up positive inflows of around USD 72 million as crypto traders prepare for the expected approval of spot Ethereum ETFs. Altcoins like Solana, Avalanche benefitted from bullish sentiment, with Solana-based funds attracting close to USD 4.3 million in inflows.
In a commentary accompanying the data release, CoinShares said price weakness caused by the German government’s Bitcoin liquidation last week, along with "changing sentiment thanks to lower than anticipated inflation readings in the US had spurred investors to extend their crypto positions.”
In May of this year, following a period of sustained outflows, better days appeared to be back for Bitcoin exchange-traded funds (ETFs). Across the board, every one of the (then) new-ish class of US investment products saw cash flow turn positive.
Figures published by Farside Investors showed that for the first time since receiving SEC approval, Bitcoin ETFs had achieved a unanimous turnaround. Investors flowing more cash into Grayscale’s Bitcoin Trust (GBTC) was the definitive move, marking the first-time that net inflows went positive since converting to an ETF in January.
From that point the fund experienced daily outflows as investors who had been unable to redeem shares previously exercised the option, apparently in a bid to locate competing funds with lower fees.
That all changed when GBTC ballooned by USD 62 million. That, and parallel moves by investors sending cash to all the other crypto funds, added up to USD 378 million flowing into the Bitcoin ETF market in a single day.
The turnaround was notable since the new investment vehicles had also posted their worst day ever the same week, losing more than half a billion dollars. The sudden departure came after weeks of cooling investor interest.
In January, the US Securities and Exchange Commission (SEC) finally gave assent to 11 spot Bitcoin ETF applications after a decade of regulatory heel-dragging. The funds allow everyday investors to gain exposure to crypto markets through a brokerage account. The instruments track the price of the cryptocurrency, so investors don't have to hold the crypto and face direct exposure to its ups and downs.
Earlier this year, January figures from CoinShares suggested a lot of money was exiting big Bitcoin funds, possibly explaining the price drop BTC and other cryptocurrencies experienced in the same time frame.
On the upside it appeared that outflows from the biggest fund, Grayscale, were starting to subside.
Investors had been in a hurry to cash out their Grayscale holdings since the fund changed over to an exchange-traded fund (ETF) in early January. This sent Bitcoin’s price plummeting when the fund moved its cryptocurrency holdings to Coinbase for custody.
The outflows from Grayscale alone came to USD 2.2 billion by mid-January, though CoinShares says outflows were starting to level off by end of January.
CoinShares added that investors also took over USD 500 million out of the hands of big crypto fund managers like Fidelity, ProShares, Bitwise, and 21Shares. Most of the outflows were in BTC.
Yet even with all the cash flowing out of these big funds, the newly minted Bitcoin ETFs did see significant inflows. ‘Newly approved BTC ETFs saw inflows in the region of USD 1.8 billion, a reverse image of the impact in BTC investment funds. Since Bitcoin ETFs were approved by the SEC in early January, there have been inflows of USD 5.93 billion,’ CoinShares said.
The long-awaited regulatory approval of 10 BTC ETFs and the start of trading on Wall Street had sent investors racing to get an early piece of the action. Pent-up demand intensified ahead of the SEC’s begrudging approval; and regulators had been dragging their heels on processing spot Bitcoin ETFs as late as November 2023.
In an odd twist of the market, surging interest in the new investment vehicles didn’t really have an impact on BTC’s price. Spot Bitcoin ETFs are designed to give investors exposure to cryptocurrency price moves in a safe and regulated manner.
In July 2023, big investors also started pulling their money out of crypto funds after a period of robust inflows.
At the time, a report form CoinShares said that a total of USD 6.5 million had left crypto investment products in the 2nd week of July 2023, a sharp reversal after four consecutive weeks of inflows totaling USD 741 million.
Most of the money was focused on Bitcoin and flowed out of large funds for accredited investors and run by the likes of big firms like Grayscale and 21 Shares.
By early August, Bitcoin had fallen back to USD 29,200 after reaching a five-day high of USD 30,240, a drop of nearly three per cent in 48 hours.
