US Bitcoin ETFs See Record $564M Outflow Amid Crypto Dip

Key Takeaway

• US Bitcoin ETFs experienced their largest daily outflow of $564 million amid a challenging week for crypto assets.
• Despite the outflow, the funds still boast a net inflow of over $11 billion, indicating sustained interest in cryptocurrency ETFs.
• Fidelity and BlackRock's funds were notably impacted, with record discounts to net asset value highlighting Bitcoin's volatility challenges.

Historic Outflows Hit US Bitcoin ETFs

US-based spot-Bitcoin exchange-traded funds (ETFs) experienced a record daily outflow, with investors withdrawing a net $564 million on Wednesday. This significant drawdown marks the largest since these products were introduced in January. The outflows come amid a challenging week for Bitcoin, which is on track for its worst performance since August 2023, largely due to the anticipation of persistently high interest rates impacting riskier assets like cryptocurrencies.

ETF Performance Amid Tightening Financial Conditions

Despite the recent outflows, the group of almost a dozen Bitcoin ETFs, including those from BlackRock Inc. and Fidelity Investments, still boasts a net inflow exceeding $11 billion since their inception. These funds were part of an unprecedentedly successful launch, propelling Bitcoin to a near all-time high of $74,000 in March. However, demand has waned as the US faces tighter financial conditions and the Federal Reserve grapples with high inflation. Caroline Bowler, CEO of BTC Markets Pty, commented, "There has been a retrenchment in Bitcoin and outflows from the ETFs, but the overall picture is healthy in terms of ETF demand in different geographies."

Record Discounts and Market Volatility

The volatility of Bitcoin has led to record discounts to net asset value for some US Bitcoin ETFs, highlighting the challenges of Bitcoin's price fluctuations. The iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) closed Tuesday with their largest discounts since launch. This situation, while concerning, was described by Matt Hougan, chief investment officer at Bitwise, as "more an accounting quirk than a real issue," attributing the discounts to the unusual way these funds track the value of their assets.

Street Views

• Caroline Bowler, BTC Markets Pty (Neutral on US Bitcoin ETFs):

  "This is a snapshot in time. There has been a retrenchment in Bitcoin and outflows from the ETFs, but the overall picture is healthy in terms of ETF demand in different geographies."