Bitcoin ETF: $1.44 billion leaves funds in five sessions

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The last session of the cycle, Wednesday November 11, cost American funds $299.9 million. November already has, for its part, 1.88 billion dollars in net outflows.

The trigger dates back to November 5. That day, the Nasdaq Composite fell 5.5% in one session.

Indeed, Bitcoin ETFs lost around $430 million, while managers reduced their exposure to risky assets.

For Tim Sun, senior researcher at HashKey, this wave reflects the caution of institutional investors. They are reducing their exposure after the decline in risk appetite, and in their eyes nothing invalidates the long-term allocation thesis on bitcoin.

Let's put it into perspective, because these five sessions only represent around 2.6% of the 55.1 billion accumulated in net inflows since the launch. What to talk about adjustment, not disarray.

Thus, the funds now only display $93.7 billion in assets, far from their peak of $169.5 billion. Withdrawals and falling prices together weigh on this total.

Another signal, more uncomfortable for the wearers. Tim Sun estimates the average purchase cost of shares at approximately $81,000. At $73,358, bitcoin leaves some investors with an unrealized loss, and some could reduce it further by the end of the year.

Withdrawal figures only tell half the story. At HashKey as at BitGo, the diagnosis converges: the feedback from buyers is the real unknown. For Tim Sun, “the most critical factor is the persistent absence of buying demand”, the effect of which on prices could exceed that of the releases themselves.

In a note shared with Decrypt, Greg Cipolaro, director of research at BitGo, combed through the data. However, the upswing following the American elections only attracted $75 million into funds.

At the same time, the supply of stablecoins fell by 1.9%, to $286.3 billion. Little fresh capital would therefore bide its time away from the market.

Glassnode drives the point home. In thirty days, the total mass of stablecoins has fallen by 14.2 billion dollars, the sharpest contraction since June 2022.

These stablecoins are the liquidity pocket of the crypto market. When it empties, there is less capital left ready to buy the decline.

A financial mechanism is added to this lack of buyers. Hedge funds bought shares of ETFs while selling bitcoin futures contracts, to pocket the price difference between the two, the basis trade. In other words, an almost guaranteed gain as long as the difference exceeded the cost of the operation.

This gap has fallen below the cost of borrowing, and the arrangement loses all interest. A lot of funds therefore left it. ETF flows now reflect real demand for bitcoin more accurately than before, observes Tim Sun.

Corporate buyers are also slowing down. The premium of Strategy stock on the value of its bitcoins is melting, and raising funds to buy more and more is losing its appeal.

Furthermore, the release of the title from the MSCI indices on November 30 could dry up part of the passive flows.

Greg Cipolaro's picture remains the darkest. Indeed, bitcoin fell with risky assets, but it missed their rebounds. As long as it does not participate in rallies and demand for ETFs does not pick up again, digital assets remain under threat of further declines.

Others have long memories. Eric Balchunas, ETF analyst at Bloomberg, discusses the GLD golden fund, invested in gold. After its peak in 2011, it lost around 40% of its holders and took almost ten years to regain its outstanding assets.

Yet today it holds nearly triple that peak. Assets without cash flow live on sentiment, and sentiment changes, he summarizes.

Regardless, not all managers are giving up, and BlackRock is counting on billions of additional dollars in its crypto ETFs. Feedback from buyers will tell if these five sessions were just a simple adjustment.

An editorial article. Le Journal du Coin, the first French-speaking news media on cryptocurrency, Bitcoin, and blockchain protocols.

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Machine-translated from French