Spot Bitcoin ETF Hype Dies Down, Normalcy Sets In

It's hardly unusual for ETFs of any ilk to go through periods of seeing no fresh money on a net basis, explained an analyst.

AccessTimeIconApr 16, 2024 at 7:32 p.m. UTC
Updated Apr 16, 2024 at 7:35 p.m. UTC
  • Spot bitcoin ETF flows have slowed after weeks of heavy buying.
  • Only IBIT, BlackRock's iShares Bitcoin Trust, continues its streak of consecutive daily positive flows.
  • This is a normal development within the ETF space, an expert said.

The initial euphoria for the spot bitcoin ETFs has seemingly dampened and reality is slowly kicking in with inflows recently unable to keep up with the still speedy pace of exits from Grayscale's Bitcoin Trust (GBTC).

The result is that in the week ended April 12, the spot ETFs as a whole saw a net outflow of 1,766 bitcoins.

On last Friday and again on Monday, Fidelity’s Wise Origin Bitcoin Fund (FBTC) had inflows of $0, breaking its streak of daily additions that started at launch on January 11. That leaves BlackRock’s iShares Bitcoin Trust (IBIT) as the only spot bitcoin ETF left that's experienced an unbroken string of inflows since the vehicles began trading.

For most of the remaining funds, including the Invesco Galaxy Bitcoin ETF (BTCO), the VanEck Bitcoin Trust (HODL) and the Valkyrie Bitcoin Fund (BRRR), among others, zero inflows and even the occasional outflow has become the norm.

This is not out of the ordinary, said James Seyffart, ETF analyst at Bloomberg Intelligence in a post on X. He points out that around 83% of all ETFs on the U.S. market saw zero inflows on Monday, for example.

Seyffart explained that the creation and redemption of shares of an ETF only takes place when a large enough mismatch in supply and demand exists and the cost to do so is lower than hedging. In the case of the bitcoin ETFs, these creation units range anywhere from 5,000 to 50,000 shares. “Minor mismatches will see the market makers handle trading of shares just like they would a stock,” Seyffart wrote.

The recent slowdown doesn’t however mean that traders need to get used to lower flows. While the initial sentiment for the ETFs in the first few weeks of existence certainly resulted in volume higher than any other ETFs have seen before, traders could see more significant positive flows in the future.

“There is surely potential for a resurgence in inflows,” said Samir Kerbage, chief investment officer at Hashdex, which converted its bitcoin futures fund into a spot bitcoin ETF in March.

“Many banks, endowments, and pension funds worldwide are only now beginning their due diligence processes before considering strategic allocations to BTC through newly launched ETFs," Kerbage continued. "As these large financial institutions make decisions over the coming months, it is likely that inflows will increase once again, potentially reaching new milestones for what has been one of the most successful ETF launches in US history.”

Turning to Grayscale's Bitcoin Trust (GBTC), which continues to see outflows of 1,000 or more bitcoins on a daily basis, Seyffart isn't anticipating a reversal. “I do not really expect inflows into GBTC as it’s currently constructed,” he told CoinDesk. “With GBTC at a 1.5% expense ratio, I would be surprised if GBTC saw any net inflow days and shocked if it saw sustained inflows over any time period.”

Edited by Stephen Alpher.


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Helene Braun

Helene is a New York-based reporter covering Wall Street, the rise of the spot bitcoin ETFs and crypto exchanges. She is also the co-host of CoinDesk's Markets Daily show. Helene is a graduate of New York University's business and economic reporting program and has appeared on CBS News, YahooFinance and Nasdaq TradeTalks. She holds BTC and ETH.