[TL; DR]
Fidelity and Biwise’s BITB had net capital inflows within the last two weeks.
Grayscale’s GBTC had a net outflow during the past two weeks.
Institutional investors continus to invest in spot bitcoin ETFs.
Introduction
The introduction of crypto ETFs have created a new avenue through which people invest in cryptocurrencies without owning them. Particularly, the exchange-traded funds appeal to institutional investors that prefer to invest in regulated products to unregulated ones. Grayscale Bitcoin Trust (GBTC) and the iShares Bitcoin Trust (IBIT) are among the leading spot bitcoin ETFs. Today, we examine the state of affairs within the United States-listed spot BTC ETFs.
The Current State of Bitcoin ETF Inflows and GBTC Outflows
There is a balanced state of affairs within the spot BTC ETF market as some of the funds recorded inflows while others had outflows. Based on some bitcoin market trends, despite huge outflows from the Grayscale Bitcoin Trust (GBTC) most of the bitcoin ETFs recorded decent inflows. As an example, on 15 August the Bitcoin spot exchange-traded funds (ETFs) had a net inflow of $11.11 million, signalling how the funds are an important part of the cryptocurrency investment sector.
Sosovalue data shows that the cumulative net inflow of spot bitcoin ETFs has reached $17.33 billion which contributed a total net asset value of $51.99 billion in the process. As of now, the $52 billion blockchain ETF inflows represents close to 4.65% of the total BTC market cap. This milestone shows the growing digital asset management firms interest in investing in cryptocurrencies depending on their crypto investment strategies.
In terms of inflows, on 15 August Fidelity led the way with $16.2 million, followed by the recently launched Grayscale’s Bitcoin mini trust which had $13.7 million. Third on the list was Biwise’s BITB which had an inflow of $6.2 million. Of all the spot bitcoin ETFs the Grayscale’s GBTC was the only one that registered a net outflow of $25 million which pushed its outflow tally to $19.57 billion since its inception in January. The other seven spot bitcoin ETFs had no activity on that day. In all, the high spot bitcoin ETF inflows indicate a rise in institutional crypto adoption.
Analysis of Spot Bitcoin ETF Market Performance: Reasons for High GBTC Outflows
When the United States SEC approved the spot bitcoin ETFs in January Grayscale had a strong head start as it had a first mover advantage. Sadly, that advantage no longer exists as most investors are relocating their funds to other digital asset management firms such as Fidelity. Although Grayscale was the first company to offer ETF-type products it now has several competitors that are stealing the show.
It did not take much time for many investors to pull out their funds from Grayscale and the trend still continues. During the past two weeks investors have pulled out more than $200 million out of Grayscale. Also, over the past month more than $935 million left the fund. Due to the combined effect of these withdrawals and price fluctuations the value of GBTC’s total assets has dropped to $13.1 billion which is its lowest AUM since March last year.
According to Dune Analytics, BlackRock asset management firm has overtaken Grayscale in terms of assets under its management. BlackRock’s iShares Bitcoin Trust (IBIT) now holds about 37.6% of the total Bitcoin spot ETF assets valued at about $20.1 billion. More significantly, Fidelity’s Wise Origin Bitcoin Fund’s (FBTC) assets under management now account for 21.3% of the market. Therefore, there is a high chance that it may also overtake Grayscale in the near future.
There are a number of reasons why there is high GBTC outflows. One of the reasons that might have contributed to the outflows is the New York Stock Exchange’s (NYSE) Arca electronic exchange’s withdrawal of a rule that would have allowed the trading of crypto ETFs including GBTC. The other reason is GBTC’s fees which are higher than those of other BTC ETF issuers. For example, GBTC’s expense ratio of 1.5% is far higher than that of BlackRock’s IBIT which stands at 0.12%. Also, GBTC's expense ratio is about 60 points higher than Hashdex Bitcoin ETF’s (DEFI), the next costliest fund.
Evaluation of the Current Investor Sentiment and Strategies
The recent trend shows that investors have confidence in spot bitcoin ETFs. Overall, there is an increase in inflow in the sector. The fact that GBTC’s outflows is very high shows the investors’ different preferences. Some ETF investors may be relocating their funds from GBTC to other asset management firms. This also indicates the investment fee is an important consideration for many investors.
Future of Bitcoin ETFs and GBTC
Looking at how BTC ETF investment has progressed since January the market has well-received the funds. The fact that both retail and institutional investors continue to invest in the ETFs shows the trust they have in the product. Also, the fact that there has never been incidences of market manipulation is a good seal that crypto ETFs are reliable investment products. As a result, the crypto market can safely anticipate the launch of more crypto ETPs which will increase competition in the market. As bitcoin ETFs become available in many countries there will be a rise in global access to bitcoin investment. In particular, the bitcoin ETFs will attract many institutional investors which will help to legitimize bitcoin and other crypto assets.
On the other hand, Grayscale has shown its intention to remain a leader in the bitcoin ETF sector through launching a Bitcoin Mini Trust, which is seeded by a percentage of GBTC. Since the Grayscale Bitcoin Mini Trust will have a low fee it will likely attract many investors which may increase capital inflow into the fund. The existing GBTC investors will benefit from lower total blended fees. They may also be exempted from paying capital gain tax when transferring their funds to the Bitcoin Mini Trust.
Conclusion
Grayscale GBTC recorded a large net outflow within the last two weeks. Generally, though, the fund has been witnessing outflows since January. However, Fidelity and Biwise’s BITB registered impressive inflows during the same period while the rest had no changes. The performance of spot bitcoin ETFs up to now has created confidence in the market.