Bitcoin Held in Funds Drops to Lowest Since October 2021, ByteTree Data Shows

Wealth management industry globally is very light in both bitcoin and gold, one observer said.

AccessTimeIconMar 16, 2023 at 8:59 a.m. UTC
Updated Mar 8, 2024 at 4:51 p.m. UTC

Bitcoin (BTC) funds are bleeding coins as U.S. bank failures fuel expectations of an early Federal Reserve pivot in favor of liquidity easing.

Data tracked by ByteTree Asset Management shows the number of coins held by close-ended funds, spot and futures-focused exchange-traded funds (ETF) in Europe, the U.S. and Canada has declined by 16,560 BTC ($409 million) this month, reaching a 17-month low of 826,113 BTC.

ETFs and other investment vehicles that allow taking exposure to bitcoin without having to own the cryptocurrency are widely considered a proxy for institutional activity.

The decline in fund balance suggests a lack of institutional participation in bitcoin's recent rally, reportedly fueled by safe-haven demand and renewed hopes for Fed interest rate cuts in the second half of the year. According to some observers, the gains are evidence of bitcoin's strengthening appeal as a hedge against the banking system.

Bitcoin picked up a strong bid near $19,600 late Friday after Silicon Valley Bank, formerly one of the top 20 lenders in the U.S., shut operations. Bitcoin's price has risen over 25% since then, reaching a nine-month high of $26,501 on Tuesday, CoinDesk data shows.

"Institutions aren’t buying the narrative that BTC is serious and here to stay," Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk. "Wealth management industry globally is very light in both bitcoin and gold."

Morris, however, cautioned against drawing conclusions from the data, saying a large outflow from a single fund is mainly responsible for dragging the tally lower.

Besides, the decline in the balance held in funds does not necessarily mean the price rally lacks strength and is unsustainable. Markus Thielen, head of research and strategy at Matrixport, said the balance held in funds accounts for a small portion of the total market and other sources of demand are lifting prices higher.

"The fund holdings data is not meaningful. I suspect USDC holders are converting their stablecoin into BTC," Thielen noted. Binance recently announced it is converting $1 billion worth of funds held in BUSD to bitcoin, BNB and ether.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.