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Bitcoin ETFs Experience $35.6 Million Outflow in First Single-Day Drop Since January

Spot Bitcoin ETFs in the U.S. saw daily net outflows for the first time as Grayscale GBTC selloffs outpaced inflows into nine other funds.

On Feb. 21, spot Bitcoin (BTC) ETFs recorded net outflows worth $35.6 million in what may be a round of profit-taking by investors. Yesterday was the first day these Bitcoin-based exchange-traded funds experienced negative numbers since Jan. 25, following 17 days of consecutive net inflows mainly led by BlackRock and Fidelity.

According to SoSoValue, Grayscale’s GBTC ETF accounted for the bulk outflows. GBTC shed $199 million, bringing total exits from the converted Grayscale Trust closer to $8 billion at press time. GBTC was still the largest spot Bitcoin ETF on the market, with $22.7 billion in assets under management (AUM).

BlackRock and Fidelity remain spot Bitcoin ETF leaders behind Grayscale, and both firms pulled inflows worth tens of millions despite GBTC exits. The issuers had $96.5 million and $52.4 million flow into their funds. These two combined boast over $10 billion in AUM and cumulative inflows, more than any other issuer excluding GBTC.

Spot Bitcoin ETF
Spot BTC ETF daily flows | Source: SoSoValue

Experts: Spot Bitcoin ETFs great for price rallies

Bitcoin is seeing demand via institutional investment wrappers despite the first day of net outflows in about four weeks underpinned by GBTC redemptions. Nine issuers have accumulated over 250,000 BTC in less than a quarter, vaulting over incumbent Bitcoin holders like MicroStrategy and Tether.

Fundstrat co-founder and research chief, Thomas J. Lee, said these investment vehicles will continue to attract capital from retail investors and corporate equity alike. Lee explained that this sustained interest will most likely contribute to higher prices for Bitcoin.

Additionally, experts surmise the upcoming BTC halving, expected in April, will introduce a supply shock as Bitcoin rewards are slashed by 50% and scarcity is bolstered. 

The surge in interest in spot Bitcoin ETFs is also attributed to their ability to provide retail investors and institutions with exposure to Bitcoin through regulated markets, allowing them to participate in the cryptocurrency market without directly owning the underlying asset. This indirect exposure adds an additional layer of risk management and regulatory compliance for investors.

Furthermore, the increased adoption of spot Bitcoin ETFs is indicative of the growing acceptance and integration of cryptocurrencies into traditional financial systems. As more institutional players enter the space, the demand for regulated investment products tied to cryptocurrencies is expected to rise, driving further growth in the ETF market.

Experts believe that the recent net outflows from spot Bitcoin ETFs may be a temporary phenomenon driven by profit-taking and rebalancing strategies rather than a sign of waning interest in the asset class. As market dynamics continue to evolve and regulatory clarity improves, the outlook for Bitcoin ETFs remains bullish.

Implications of Spot Bitcoin ETF Flows on Market Dynamics

The recent shift in flows from spot Bitcoin ETFs could have broader implications for the cryptocurrency market as a whole. Investors closely monitor the movements of institutional capital in and out of these funds as a barometer of market sentiment and future price trends.

While net outflows may indicate short-term fluctuations in investor behavior, the overall trend of growing institutional adoption of Bitcoin through ETFs is likely to continue. As more traditional financial institutions enter the space and offer regulated exposure to cryptocurrencies, the market is expected to become more resilient and attract a wider range of investors.

Moreover, the development of a robust ETF market for Bitcoin could pave the way for increased liquidity, price discovery, and stability in the cryptocurrency market. ETFs provide a more accessible and familiar investment vehicle for retail and institutional investors, facilitating broader participation and reducing barriers to entry.

Overall, the dynamics of spot Bitcoin ETF flows reflect the evolving landscape of cryptocurrency investments, blending traditional financial instruments with digital assets to create diversified portfolios and balanced risk exposure. As the market matures and regulatory frameworks become more established, the role of ETFs in shaping the future of cryptocurrencies is expected to become increasingly significant.

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