Spot Bitcoin ETFs flows appear to be moderating according to data from Farside. This data showed that Spot bitcoin exchange-traded funds in the United States experienced net outflows yesterday of $228.3 million. The primary reason was Grayscale's GBTC spot ETF, which saw a single-day net outflow of over $303 million.This was a significant change from last week, which saw a cumulative inflow of $484.5 million into Spot Bitcoin ETFs. Although Bitcoin Spot ETF Cumulative flows stood at $12.385 bn by 8 April, it does appear that cumulative spot bitcoin ETF volumes have decreased at a relatively steady rate since peaking in early March. Nevertheless, as noted by The Block, Fidelity’s FBTC spot bitcoin ETF has exceeded 150,000 BTC in assets under management after just three months of trading. The other nine spot Bitcoin ETFs — excluding Grayscale’s converted GBTC fund — now total more than 520,000 BTC.
However, EXANTE clients remain more optimistic than most investors. They increased their investment in Spot Bitcoin ETFs by 2.9% compared with the wider market at -4.2%. The question is becoming, what do EXANTE’s clients, most of whom are experienced Bitcoin traders, know that perhaps the rest of the market isn’t yet really focusing on?
It also appears that EXANTE’s clients are maintaining their focus on Bitcoin ETFs by slightly increasing their holdings of Bitcoin ETFS relative to Bitcoin CFDs. Bitcoin ETFs holdings have increased from 46.1% on 26 March to 47.8% by 7 April. Conversely Bitcoin CFD holdings have fallen from 49.5% on 26 March to 47.9% by 7 April. This indicates EXANTE clients may be more focused on the demand drivers behind Spot Bitcoin ETFs.
What are some of the drivers?
The drop in major cryptocurrencies’ prices a few weeks ago sparked an increase in liquidations in the derivatives market. In the derivatives sector, outstanding contracts — or open interest — at the Chicago Mercantile Exchange (CME) Bitcoin futures market dropped as of 8 April to 29.481 from 32.071 on 25 March.
However, this may be attributable to just short term volatility, with the upward trend in Bitcoin likely to continue as the next Bitcoin halving gets closer, currently expected around 20th April, and as institutional investors, such as ABN AMRO, Citadel Securities, Citigroup, Goldman Sachs, and UBS, become new authorised participants in Bitcoin ETFs. As noted by Blockchain.News, authorised participants (APs) are essential for the working of the ETF machinery, with the responsibility to create and redeem ETF shares. These institutions can obtain shares of the ETF directly from the fund manager by exchanging the underlying assets that the ETF is designed to track. Conversely, they can also redeem shares of the ETF for the underlying assets. This process helps maintain the liquidity of the ETF and ensures that its share price closely tracks the net asset value of the underlying assets.
Although Bitcoin will likely continue to remain volatile in light of changing expectations around interest rate cuts, particularly from the US Fed following on from last week’s strong Nonfarm payroll number and improved manufacturing PMI, much will depend on Wednesday and Thursdays CPI and PPI numbers respectively in terms of how bond markets and yields may respond. This will in turn potentially impact the degree of interest in holding Bitcoin or Bitcoin ETFs. However, as more and more global regulators continue to explore the adoption of these new financial products, such as the UK’s Bank of England and Financial Conduct Authority looking to explore their use via a digital sandbox, or accept the adoption of these new Bitcoin-backed financial products, something the South Korea government appears anxious to do given that the existing government has pledged to delay a digital-asset tax, while the opposition Democratic Party has pledged to lift curbs on exchange-traded funds — including US Bitcoin products — that directly hold tokens.
With the widening of these products' availability to institutional investors in different formats globally, there will likely be more, not less, interest by investors of all sizes and types, in Bitcoin. And, in time, we may also see growing interest in Ether if the US Securities and Exchange Commission (SEC) does approve an Ethereum ETF by the end of May after its review. The SEC delayed its original deadline in March for a decision on the ether ETF application. Investment titans such as BlackRock Inc. and Fidelity Investments have submitted applications to start such funds, but it is still not clear the regulator will give the green light for these as it does not, as noted by Bloomberg news, consider it to be a commodity. While Bitcoin is acknowledged to be a commodity, the SEC argues most other tokens are effectively unregistered securities and are therefore non-compliant. As with the Spot Bitcoin ETFs approval will likely hinge on whether there are relatively strong correlations between spot and futures markets.
While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.
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