Bitcoin Spot ETFs Absorb Record Daily Flows, Reaching $2.9 Billion in Assets Under Management

The recent launch of Bitcoin-themed spot exchange-traded funds saw their peak daily inflows on their fourth day of trading, with $913.6 million absorbed on Wednesday. This influx of capital

Record daily flows were observed in new Bitcoin ETFs as the total Bitcoin holdings reached $3 billion.

📷 Andrew Throuvalas | Verified by Khashayar Abbasi Last updated: January 18, 2024 02:36 EST | 1 min read

📷 Source: Adobe Stock Newly launched Bitcoin spot ETFs saw their highest daily flows on their fourth day of trading, absorbing $913.6 million on Wednesday. This wave of capital brings assets under management for all such funds that began trading last week up to $2.9 billion.

Both figures, provided by Bloomberg ETF analyst Eric Balchunas, exclude flows related to the Grayscale Bitcoin Trust (GBTC). The Grayscale fund recently converted into an ETF on January 11, after accumulating over 600,000 BTC years in advance. Since the conversion, the fund has experienced consistent outflows as investors cash in on long-held BTC or rotate into newer, cheaper Bitcoin ETFs provided by BlackRock, Fidelity, and others.

On Wednesday, Grayscale experienced $450.6 million in outflows, bringing its net outflows up to $1.6 billion since the ETF conversion. Across the board, net flows to all ETFs have amounted to $1.2 billion.

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The first day of launch remains the top day for Bitcoin ETF inflows when including GBTC ($625.8 million). However, it’s worth noting that this includes seed capital, such as Bitwise’s initial $200 million contribution. As Eric Balchunas wrote to X on Thursday, “ETFs have been making money from high-cost mutual funds for decades now. The ‘Nine’ gonna steal from more than GBTC too. Anything high cost is vulnerable now.”

Flows From Rival Bitcoin ETF

Indeed, other Bitcoin funds and investment products have suffered since the launch of the Bitcoin spot ETFs. The ProShares Bitcoin Strategy ETF (BITO), a Bitcoin futures ETF launched in October 2021, has seen its assets under management dwindle from $2.28 billion before the spot ETF approvals to $1.86 billion as of Tuesday.

Meanwhile, MicroStrategy, the world’s largest corporate holder of BTC, has seen a 25% drop to $500 since last Thursday, after rallying to almost $700 at the start of the year. Bitcoin mining firms like CleanSpark (CLSK) have also experienced corrections of over 30%.

Bitcoin itself has fallen roughly 11% to $41,250 since last week. Interestingly, shares of the newly launched ETFs, like the iShares Bitcoin Trust (IBIT), are yet to register a single day in the green.

Coinbase (COIN), which serves as Bitcoin custodian for most of the ETF providers, has also fallen 19% year to date.

Q&A: What You Need to Know About Bitcoin ETFs

Q: What is the main advantage of investing in a Bitcoin ETF compared to directly holding Bitcoin?

A: One of the main advantages of investing in a Bitcoin ETF is that it provides exposure to Bitcoin without requiring investors to hold the actual cryptocurrency. This means eliminating the operational complexities of storing and securing Bitcoin, such as setting up a digital wallet and managing private keys. Additionally, investing in a Bitcoin ETF allows for easy buying and selling through traditional brokerage accounts, providing liquidity and convenience.

Q: Are there any risks associated with investing in Bitcoin ETFs?

A: Like any investment, Bitcoin ETFs come with their own set of risks. One major risk is the volatility of Bitcoin itself. Bitcoin’s price can experience significant fluctuations, and as a result, the value of a Bitcoin ETF can be highly volatile as well. Additionally, regulatory risks, liquidity risks, and the potential for market manipulation are factors that investors should consider when investing in Bitcoin ETFs.

Q: Will the launch of Bitcoin spot ETFs impact the price of Bitcoin?

A: The launch of Bitcoin spot ETFs can potentially have an impact on the price of Bitcoin. As more investors gain exposure to Bitcoin through these ETFs, it can increase demand for the cryptocurrency, leading to upward pressure on its price. However, it is important to note that the relationship between Bitcoin spot ETFs and the price of Bitcoin is complex and can be influenced by various factors, including market sentiment and overall market conditions.

Q: What are some alternative investment options for those interested in Bitcoin?

A: Besides Bitcoin ETFs, there are several other ways to gain exposure to Bitcoin. Directly purchasing Bitcoin from cryptocurrency exchanges is one option for investors who wish to hold the actual cryptocurrency. Another option is investing in Bitcoin-focused investment trusts, such as the Grayscale Bitcoin Trust (GBTC) or the Bitwise 10 Crypto Index Fund. These investment vehicles provide exposure to Bitcoin through shares traded on traditional stock exchanges.

Future Outlook and Investment Recommendations

Despite the recent outflows from the Grayscale Bitcoin Trust and the decline in Bitcoin’s price, the launch of Bitcoin spot ETFs has demonstrated strong investor interest in gaining exposure to the cryptocurrency. With the increasing popularity of Bitcoin ETFs, it is expected that more institutional and retail investors will enter the market, further driving the demand for Bitcoin.

However, it is important for investors to carefully consider their investment goals, risk tolerance, and time horizons before investing in Bitcoin or Bitcoin ETFs. Due to the inherent volatility of the cryptocurrency market, it is advisable to only invest what one can afford to lose and to diversify their investment portfolio with other asset classes.

In conclusion, the record daily flows into Bitcoin spot ETFs and the growing assets under management indicate a significant shift in investor sentiment towards Bitcoin. While the market has experienced short-term price corrections, the long-term outlook for Bitcoin and the cryptocurrency market remains favorable. As more investors embrace cryptocurrencies, it is crucial to stay informed, evaluate investment options, and make decisions based on careful analysis and consideration.

🌐 References: – Bitcoin Not Taking Off as Mainstream Payment, Says BOE Governor – Coinbase Custody Head Departs as Crypto Giant Prepares for Bitcoin ETF Services

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