Grayscale Ends 78-Day Streak of $17.5B BTC ETF Outflows

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KEY TAKEAWAYS

  • Grayscale's Bitcoin Trust (GBTC) saw a reversal in outflows, recording consecutive days of inflows after a four-month streak of net outflows.
  • While GBTC experienced net outflows totaling over $17.5 billion since January, the overall spot Bitcoin ETF market maintained a positive balance sheet.
  • Bitcoin closed the week with heightened volatility, rebounding from a significant dip mid-week to close at approximately $64,000.
  • Despite positive developments for Bitcoin ETFs, the SEC delayed decisions on approving spot Ethereum ETF applications.
  • Market participants anticipate challenges in securing approval for spot Ethereum ETFs due to liquidity concerns and Ethereum's previous classification as a security by the SEC.

Crypto asset manager Grayscale has broken the four-month streak of outflows from its spot Bitcoin exchange-traded fund (ETF), seeing inflows for two consecutive days of trading.

For 78 days since January 11, an average of approximately $218 million a day had been exiting the Grayscale Bitcoin Trust (GBTC), resulting in a total outflow of over $17.5 billion.

However, on Friday, May 3, the downward trajectory was reversed when GBTC experienced its first inflow of $63 million. As a result, the overall spot Bitcoin ETF market saw net positive inflows of $378.3 million after seven days of continuous outflows.

The trend continued on Monday, May 6, as GBTC recorded its second inflow of $3.9 million, bringing the total inflows to $66.9 million.

Other Spot Bitcoin Funds Continue to See Inflows

Although GBTC has experienced a net outflow of $17.4 billion, the overall spot Bitcoin ETFs in the United States maintained a positive balance sheet. The iShares Bitcoin Trust from BlackRock has attracted the largest investment, with net inflows of $15.5 billion.

The iShares fund, the most successful one with more than $17 billion in assets under management, saw continued inflows until last month. On May 1, BlackRock’s iShares ETF recorded outflows for the first time, seeing $36.9 million worth of shares liquidated.

Other major contributors to net inflows included Fidelity Investments’ Fidelity Wise Origin Bitcoin Fund with $8.1 billion, Cathie Wood’s ARK 21Shares Bitcoin ETF with $2.1 billion, and the Bitwise Bitcoin ETF Trust with $1.7 billion.

The cumulative flow of investments into the spot Bitcoin ETF market amounted to nearly $11.8 billion at the time of writing.

In a Monday post on X, Bloomberg analyst Eric Balchunas noted that all 11 spot Bitcoin ETFs saw inflows for the first time since the launch in January. He added that ETF investors held onto their investments “during what was a pretty nasty and persistent downturn.”

“Will same happen next time? Who knows, but track record says it will be pretty high % again. As we said, outflows will happen, so will inflows but over time two things tend to be true for ETFs: net growth and relatively strong hands”.

Bitcoin Sees Heightened Volatility

Bitcoin closed the week at approximately $64,000, representing a 1.4% increase from the previous week’s closing value of around $63,100. The week was marked by heightened volatility, with prices initially dipping significantly to around $56,500 on Wednesday before rebounding above $60,000 by Friday.

While Bitcoin ETFs experienced net outflows for the fourth consecutive week, the period of outflows may have peaked, Matteo Greco, a research analyst at digital asset investment firm Fineqia International, said in a recent note.

He added that trading volume for Bitcoin ETFs remained relatively steady during the week, with cumulative trading volume since inception reaching $246.6 billion. During the week alone, trading volume amounted to $10.9 billion, a 12.3% increase from the previous week.

However, these figures still fall below the average trading volume of $3.1 billion since the inception of Bitcoin ETFs. “These figures suggest that the period of outflows may have peaked, with trading volumes showing signs of increase and outflows potentially stabilizing,” he wrote.

SEC Delays Ethereum ETF Decisions

In contrast to the positive developments for Bitcoin ETFs, the U.S. Securities and Exchange Commission (SEC) recently delayed its decision on approving or denying spot Ether ETF applications from various providers.

The decisions on applications from BlackRock, Grayscale, and Invesco Galaxy were pushed to July. The SEC justified the delay by stating that it needed more time to consider the proposed rule changes and the associated issues.

The delay affected all prospective Ether ETF issuers, including Fidelity, Franklin Templeton, Hashdex, and Ark 21Shares. The decision on the Invesco & Galaxy filing was delayed to May 6, and the SEC will also decide on the VanEck and Ark 21Shares filings, which have deadlines of May 23 and 24, respectively.

Market participants anticipate that the SEC may withhold approval for these products, despite approving Bitcoin ETFs in January. They cite concerns over the liquidity of Ether’s spot and futures markets, as well as its previous classification as a security by the SEC, which could hinder a swift approval of spot ETH ETFs.

In the event of rejection, issuers would need to resubmit filings, restarting the approval process and potentially leading to approval in the fourth quarter of 2024 or the first quarter of 2025.

The Bottom Line

Grayscale’s spot Bitcoin ETF has broken its four-month streak of outflows, with inflows totaling $66.9 million.

While challenges remain, including regulatory uncertainties and liquidity concerns, the cumulative flow of investments into the spot Bitcoin ETF market indicates continued interest and confidence in the long-term prospects of digital assets.

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