First Mover Asia: Spot Bitcoin ETFs Are Launching in Australia but Elsewhere They Face Brutal Fund Outflows
Australia follows a lengthy list of spot bitcoin issuances in Europe and Canada, but these products come at a challenging time for crypto; bitcoin and ether drop.
Good morning. Here’s what’s happening:
Prices: Bitcoin, ether and other major cryptos plummeted as investors remained averse to risk.
Insights: Spot BTC ETFs launch in Australia. But elsewhere, they are facing fund outflows.
Technician's take: BTC's current pullback is similar to what occurred in September of last year, albeit with weak price momentum.
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Bitcoin (BTC): $38,418 -4.5%
Ether (ETH): $2,839 -5.7%
|Ethereum Classic||ETC||−8.1%||Smart Contract Platform|
|EOS||EOS||−6.4%||Smart Contract Platform|
Bitcoin and other major cryptos plunge
After a promising start to the week, bitcoin swooned on Tuesday, recently dropping about 4.5% over the past 24 hours as investors continued their recent risk-off posture amid the same macroeconomic uncertainty that has been plaguing the world throughout the year.
Just a day after bitcoin soared past $40,500 on news of financial giant Fidelity's decision to allow consumers to invest in bitcoin in their 401(k) retirement savings accounts, the largest cryptocurrency by market capitalization was trading just over $38,000, its lowest mark since early March. Ether, the second-largest crypto by market cap, was changing hands at about $2,820, off roughly 5.7%, following a day when it pushed past $3,000.
Other major altcoins by market cap were in the red, many of them significantly so. Terra's LUNA token and ADA were both recently down over 7%. Popular meme coin DOGE fell more than 9%.
Analysts have been cautious in predicting cryptos' trend in the coming weeks as bitcoin has wrestled with the $40,000 threshold with one analyst writing in a report that secondary support could form "near $27,200."
Crypto declines tracked equity markets, which tumbled as Wall Street digested an inauspicious beginning to the earnings season, fiscal tightening by the U.S. central bank, discouraging economic data and signs that Russia would escalate its attacks on neighboring Ukraine. The tech-focused Nasdaq declined a whopping 3.9%, while the S&P 500 fell 2.8%.
On Tuesday, Google parent Alphabet (GOOG) said its first-quarter profit had dropped 8%, and in a report, Deutsche Bank (DB) predicted "a major recession," revising its forecast of earlier this month for a milder downturn. The latest economic news came as Russia cut off natural gas supplies to Poland, which has been fearful that it could be a target of Russian aggression. Separately, Russia accused Western countries supportive of Ukraine of conducting a proxy war.
"Bitcoin reversed lower as risk aversion returned to Wall Street, with tech stocks leading the decline," Oanda Americas Senior Market Analyst Edward Moya wrote in an email, noting Russia's decision on Poland gas exports. Moya added: "Ethereum also turned negative and will continue to follow what happens on Wall Street."
S&P 500: 4,175 -2.8%
DJIA: 33,240 -2.3%
Nasdaq: 12,490 -3.9%
Gold: $1,905 +0.3%
Spot BTC ETFs launch in Australia. But elsewhere, they are facing fund outflows.
Australia is going to have its own bitcoin exchange-traded funds (ETF) in the near future, despite some delays because of problems with the plumbing that delayed Wednesday’s (April 27) scheduled launch.
Australia follows a long list of bitcoin ETF issuances in Canada and Europe. There’s still no spot bitcoin ETF in the U.S., but traders in Toronto, Europe and South America are able to trade frequently and in sizable volumes if they choose.
But as the Australian ETF prepares to launch it faces a market with compressed premiums and fast outflows. One of Australia’s "priciest funds" is listing just over a year after the first bitcoin ETFs hit the market in Toronto.
In the eyes of traders, these ETFs replaced the Grayscale Bitcoin Fund (GBTC) as a way to hold crypto in registered or institutional accounts. The premium on GBTC flipped negative and has stayed deeply in that territory ever since – now at -23%. (Grayscale is a CoinDesk sister company.)
The U.S. still doesn’t have a spot bitcoin ETF. But other nations quickly listed their own, and the vehicle became popular at exchanges in Europe and South America. As U.S.-based investors are familiar with the Canadian market they flocked northward, including ARK Investment.
While ETF issuers were once secretly cheerful of GBTC’s fate that cheer might have been glib as on the eve of the listing of the first Australian bitcoin ETF data shows major outflows from crypto ETFs and premium compressions.
As bitcoin continues its rangebound trajectory, drifting between $37,000 and$45,000, ETF traders seem to have lost interest and are choosing to exit the 3iQ Coinshares bitcoin ETF via redemptions after buying the dip in March. Of course, there have been other periods of outflows but they haven’t been this prominent.
And with this outflow comes a compression in premiums to the point where it's now a discount.
The 3iQ Coinshares bitcoin ETF is now trading at a -2.7% discount. This isn’t GBTC-level bad because the ETF is known to gyrate between premiums and discounts. During the 2021 summer rebound after the spring crash (where it hit a low of 5%), for instance, the ETF traded at a premium of 5.7%, occasionally rebounding to highs of 2.5%-2.7% throughout the year as the price oscillated upwards.
What will happen to Australia’s bitcoin ETF from Cosmos? Given that it's launching in a market with a net outflow from bitcoin ETFs as well as exchanges as traders look to HODL, it’s unlikely that the premium will last.
But historically speaking, strong flows are also a bullish sign as investors look to hold on to their crypto after the end of a correction anticipating prices to increase. Traders will eventually return along with their liquidity and the premium will return, but it will be a tough few months before it happens as all bitcoin ETFs look to regain their footing.
Talk about launching in a tough market.
The cryptocurrency is attempting to maintain a series of higher price lows since Jan. 24, which typically coincides with rising price momentum. This time, however, a bearish setup on the monthly chart could increase the risk of a breakdown in price.
Buyers will need to keep BTC elevated above $40,000, the midpoint of a three-month price range, in order to sustain the current recovery phase.
BTC's current pullback is similar to what occurred in September of last year, when buyers began to take profits around the $46,000-$50,000 resistance zone. Still, unlike the current situation, last year's rally above $40,000 benefited from positive long-term momentum.
For now, BTC's wide trading range could continue for another week until a decisive breakout or breakdown is confirmed.
Crypto Bahamas conference with investors, developers and other blockchain leaders
In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:
Gemini will provide custody and clearing for Australia's first bitcoin ETF fund. Gemini Global Head of Business Development Dave Abner joined "First Mover" to explain the details of this collaboration and the prospect of a spot bitcoin ETF in the U.S. Plus, PWC executive and CryptoCapsules host Henri Arslanian discussed Elon Musk's purchase of Twitter. Ming Wu of Strips Finance discussed news of interest rates trading.
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Said and heard
The move [to allow 401(k)s to invest in bitcoin] is the latest in the line of bitcoin-centric products and offerings by Fidelity, which was one of the first major firms to warm up to the then-rising asset class in 2018. (CoinDesk reporter Shaurya Malwa) ... In response to [China President Xi Jinping’s] call to rev up growth, Chinese government agencies are discussing plans to accelerate big construction projects, especially in the manufacturing, technology, energy and food sectors, as well as to issue coupons to individuals to spur consumer spending, the people said. (The Wall Street Journal) ... Crypto-assets are bringing about instability and insecurity – the exact opposite of what they promised. They are creating a new Wild West. To quote Littlefinger from “Game of Thrones,” “chaos is a ladder.” The story does not end well for this character. However, it only takes a few to climb high on the ladder – even if their gains are only temporary – to convince many others that they are missing out. (European Central Bank Executive Board Member Fabio Panetta)
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