In a notable development for the cryptocurrency market, US spot Bitcoin exchange-traded funds (ETFs) have recorded their largest daily net outflow, amounting to approximately $938 million. This significant withdrawal occurs as Bitcoin struggles to hold its value, trading below the $90,000 threshold.
Recent Outflows from Bitcoin ETFs
On February 25, the 11 Bitcoin funds collectively saw a remarkable net outflow of $937.9 million, marking the sixth consecutive day of withdrawals. The ongoing downturn in the crypto market has led to a 3.4% decline in Bitcoin’s value within a single day, dropping to a 24-hour low of $86,140 from an intraday high exceeding $92,000.
The Fidelity Wise Origin Bitcoin Fund (FBTC) led the outflows with a record loss of $344.7 million, followed by BlackRock’s iShares Bitcoin Trust (IBIT), which experienced outflows of $164.4 million. Other significant losses included:
- Bitwise Bitcoin ETF (BITB) with $88.3 million lost
- Grayscale’s two funds, which together accounted for a net loss of $151.9 million—$66.1 million from the Grayscale Bitcoin Trust (GBTC) and $85.8 million from the Bitcoin Mini Trust ETF (BTC)
Market Sentiment and Investor Behavior
This month has been particularly tough for these ETFs, with around $2.4 billion exiting the funds so far, despite only four days of net inflows. Current market sentiment indicates a growing skepticism towards Bitcoin and cryptocurrencies, especially among traditional finance investors. Observations have been made regarding the persistent negativity surrounding Bitcoin, with some noting the tendency for significant drawdowns to be met with triumphalism.
Despite these challenges, it has been emphasized that cryptocurrency is not vanishing from the financial landscape. Analysts have pointed out that many Bitcoin ETF investors are hedge funds looking for arbitrage opportunities rather than long-term holders of Bitcoin. Predictions suggest that Bitcoin could further decline to $70,000 due to ongoing outflows from spot ETFs.
Hedge Fund Strategies and Market Impact
It has been explained that many IBIT holders are hedge funds that have taken long positions in ETFs while simultaneously shorting CME futures to achieve yields that exceed those available from short-term US Treasuries. As the yield from this strategy diminishes alongside Bitcoin’s price, these funds are likely to unwind their IBIT positions and repurchase CME futures, which could increase downward pressure on Bitcoin’s price.
The unwinding of positions by hedge funds is described as a “market-neutral” strategy, involving the sale of ETFs while concurrently buying Bitcoin futures. This method effectively offsets any directional impact on the market, allowing funds to manage volatility without taking a definitive stance on Bitcoin’s price trajectory.
Shifts in Investor Base
Research indicates that more than half of the investors in spot Bitcoin ETFs are engaged in this arbitrage strategy, highlighting a shift in the investor base towards those aiming to capitalize on short-term market movements rather than committing to long-term investments in Bitcoin. As the crypto market continues to face these challenges, the relationship between traditional finance and the growing cryptocurrency sector remains intricate.
The significant outflows from Bitcoin ETFs suggest a potential shift in investor sentiment, with hedge funds and institutional players reevaluating their strategies in light of recent market developments. The interaction between ETF performance and Bitcoin’s price will be closely observed as investors seek to navigate the changing landscape of digital assets.
📎 Related coverage from: cointelegraph.com
