Spot Bitcoin exchange-traded funds’ consecutive inflows in the United States finally came to an end with the launch of spot Ethereum ETFs.

According to data provided by Farside Investors, spot Bitcoin (BTC) ETFs in the U.S. recorded a net outflow of $78 million on Tuesday, July 23. This is the first outflow for the investment products since July 3.

Per a crypto.news report on July 23, spot BTC ETFs have seen consistent inflows over the past three weeks as the broader cryptocurrency market witnessed a rebound. 

Data from Farside Investors shows that most outflows came from Bitwise Bitcoin ETF (BITB), worth $70.3 million. The ARK 21Shares Bitcoin ETF (ARKB) and Grayscale Bitcoin Trust (GBTC) also recorded $52.3 million and $27.3 million in outflows yesterday.

On the other hand, BlackRock’s iShares Bitcoin Trust (IBIT) continued its bullish momentum with $71.9 million in inflows while the crypto market registered a soft correction. 

According to data provided by CoinGecko, the global crypto market capitalization declined by 0.5% over the past day, dropping to $2.51 trillion. 

Bitcoin declined by 0.8% in the past 24 hours and is trading around the $66,000 mark at the time of writing. The second-largest cryptocurrency, Ethereum (ETH), slipped by 0.1% and is changing hands at $3,450 at the reporting time. 

The market-wide correction and spot BTC ETF outflows surfaced while the long-awaited spot ETH ETFs started trading in the U.S. Per a crypto.news report, these investment products witnessed a net inflow of $106.8 million with a $1.1 billion trading volume on launch day.

Notably, spot Bitcoin ETFs saw $655.3 million in net inflows on the day they were launched on Jan. 11. 

Crypto.news recently sat down with Matteo Greco from Fineqia International to discuss the current state of the Bitcoin ETF market and what we can expect looking ahead.

Bitcoin has emerged as one of the top-performing assets of the past decade. 

It has transcended beyond its status as a lesser-known peer-to-peer payment system, catalyzing the creation of an entirely new asset class that now boasts a market capitalization exceeding trillion.

With the approval of 11 spot Bitcoin ETFs in January 2024, traditional investors now have an easier route to gain exposure to the flagship cryptocurrency.

These investment vehicles are reshaping the crypto sector, having pulled in billions in market capital. Besides legitimizing Bitcoin, these have also drawn substantial interest from institutional players.

Another factor that might impact the Bitcoin ETF sector is the potential approval of spot ethereum ETFs. Analysts expect these to capture 20% of the investment flows currently heading towards spot Bitcoin ETFs, further adding to the intrigue.

With these developments in place, the market remains a dynamic and unpredictable arena. The future of Bitcoin ETFs, while promising, is being shaped by a myriad of factors, including regulatory developments and macroeconomic trends. 

How might these influence the market dynamics of these investment vehicles? How could these impact the price of Bitcoin?

According to Greco, the inflows into Bitcoin ETFs are significant but not the sole factor influencing Bitcoin’s price.

Why does the substantial influx of capital into Bitcoin ETFs not correspond with an equivalent rise in Bitcoin’s market price?

There are several factors that can drive the price up and down, including supply and demand, liquidity, and leverage. It’s not as simple as a single-factor correlation for price action. However, it is incorrect to say that the inflow did not sustain positive price action. When the BTC ETFs were approved on January 10th, the price of BTC was about ,000. Currently, BTC has been ranging between ,000 and ,000 for weeks, indicating a 40% – 50% price increase post-approval. At the time of the approval, BTC’s total market cap was about 0 billion, and now, with BTC at ,000, it is about .3 trillion. This represents a 0 billion increase in total market cap, while BTC ETFs saw around billion in net inflow. This means BTC’s market cap growth has been 25 times the amount of net inflow into the BTC Spot ETFs. This demonstrates that the impact of the approval and trading of these products has been substantial, extending beyond direct inflow into these financial products. It has helped sustain demand for the asset due to positive sentiment and mid-term expectations about Bitcoin and the digital assets space in general.

Could the potential approval of an Ethereum ETF significantly alter the investment landscape for Bitcoin ETFs?

Bitcoin (BTC) and Ethereum (ETH) are fundamentally different assets with distinct intrinsic characteristics. Bitcoin uses a Proof-of-Work consensus mechanism, which relies on miners, while Ethereum, like most digital assets, employs Proof-of-Stake, which does not require computational power to confirm transactions. This mechanism allows ETH and many other digital assets to offer staking rewards to investors, similar to dividends in traditional finance. BTC, however, does not have built-in staking rewards and, as a result, has different characteristics and cannot be classified as a security. Given the differing characteristics and use cases of these two major digital assets, I do not anticipate outflows from BTC ETFs moving into ETH ETFs. Instead, I expect net inflows for ETH ETFs as they represent a distinct asset that new investors, or those who have already invested in BTC ETFs, might also want to gain exposure to.

⁠What impact might the introduction of an Ethereum ETF have on Bitcoin’s status as the premiere cryptocurrency?

BTC was the most prominent cryptocurrency before the ETFs were approved and will remain so after both BTC and ETH ETFs are approved. If BTC ever loses its dominance, it will take considerable time for ETH to surpass BTC in market cap. It will be interesting to observe traditional finance’s appetite for ETH as an asset. For comparison, BTC attracted about billion in net inflows during Q1 and Q2, assuming quite neutral flows for the remaining three weeks of Q2 for a matter of simplicity. ETH’s market cap is about one-third of BTC’s, so proportionally, it should attract around billion in the six months post-launch to match BTC’s level. Higher inflows would indicate more enthusiasm for ETH, and lower inflows would suggest the opposite. While it’s challenging to make direct comparisons due to differing market sentiments at the time of launch, this serves as a useful index for mid-term analysis.

Are traditional asset ETFs, such as those for gold, influencing the market dynamics of Bitcoin?

I would look at it from the opposite perspective. Traditional asset ETFs have been trading for a long time, and the introduction of digital asset ETFs into the market represents increased competition. For instance, the impact of BTC ETFs has been significantly stronger compared to the introduction of the first gold ETF in 2004. This indicates that investors have a definite appetite for digital assets, meaning that a portion of the allocation previously reserved exclusively for traditional financial assets is now being directed towards digital asset ETFs.

Regarding the influence of the BTC Spot ETFs in the market, these products undoubtedly bolster the global recognition of BTC. With some of the most significant traditional finance businesses issuing and/or holding BTC, this leads to increased liquidity, enhanced safety, and reduced spreads and commissions for investors and traders.

With the launch of ETFs has Bitcoin generated sufficient institutional and retail interest to sustain its proposed role as an inflation hedge?

I would not limit BTC to being classified solely as an inflation hedge. While BTC can serve as an inflation hedge over long time frames, it is not a safe hedge in the short term due to its high volatility. BTC has attracted strong institutional and retail interest for a variety of use cases, which highlights its versatility. Being entirely decentralized, without a CEO or board, investors can purchase and trade BTC based on their preferred use case. Some people buy and hold BTC as a long-term investment or inflation hedge. In countries with hyperinflation, people might use BTC as a short-term inflation hedge. Others see it as a speculative investment, while some appreciate its decentralized nature and the idea of a currency not issued by central governments. It’s incorrect to pigeonhole BTC into a single category. Bitcoin is an asset that can be used for various purposes depending on individual circumstances and preferences, and its overall adoption is increasing worldwide.

Would you classify Bitcoin as a traditional investment hedge like gold?

At the current stage, I would classify BTC more as an investment, similar to stocks, due to its high volatility rather than an inflation hedge like gold or bonds during periods of high interest rates. In my view, an inflation hedge should primarily offer high stability and serve as an alternative to fiat money—something stable and liquid that can be easily used to pay for services and quickly converted to cash in an emergency. BTC falls short in this regard because its value can vary dramatically depending on market conditions, which means converting BTC to fiat could result in significant losses if done at an unfavorable time.

What does this mean for Bitcoin?

While BTC can serve as a long-term inflation hedge and a means to increase purchasing power, it cannot be defined as an inflation hedge by default. For instance, during the past bear market, BTC experienced its biggest drawdowns coinciding with peaks in inflation and interest rate hikes. Conversely, BTC began performing well again when central banks stopped raising interest rates as inflation decreased. If BTC were a short-term inflation hedge, it would have behaved oppositely, rising during high inflation and macroeconomic uncertainty and slowing down when inflation decreased and interest rates stabilized. This pattern indicates that BTC is currently traded more as a risk-on asset, similar to stocks, rather than a short-term inflation hedge. As mentioned earlier, BTC’s decentralized nature means investors can define its function in the market. Presently, the majority of investors perceive BTC as a risk-on asset and trade it accordingly.

Bitcoin (BTC) exchange-traded funds (ETFs) in the U.S. have recorded their second consecutive day of net outflows ahead of the Fed’s FOMC meeting and key U.S. inflation data out Wednesday.

According to data provided by Farside Investors, BTC ETFs in the U.S. saw 0.4 million in net outflows on June 11. Most of the outflows come from Grayscale Bitcoin Trust (GTBC) and ARK 21Shares Bitcoin ETF (ARKB), amounting to 1 million and .5 million, respectively.

Following the recent outflows, the total amount of net outflows from the GBTC spot Bitcoin ETF has surpassed the billion mark, per Farside Investors’ data. 

Moreover, the Bitwise Bitcoin ETF (BITB), Fidelity Wise Origin Bitcoin Fund (FBTC) and VanEck Bitcoin Trust (HODL) recorded .7 million, .4 million and .8 million in net outflows, respectively.

Other spot Bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust (IBIT), remain neutral.

On June 10, spot Bitcoin ETFs recorded their first day of net outflows after four weeks of constant inflows — reaching .9 million. 

The leading cryptocurrency, Bitcoin, also briefly plunged to the ,000 mark as investors have been trying to minimize their investment risks. However, crypto trader and analyst, known as Max on X, says “we’ve seen this before” — pointing out the downward momentum before the U.S. CPI data release. 

It’s important to note that the U.S. inflation data is scheduled to be released today, at 12:30 UTC, and typically a decline in the U.S. inflation rate means bullish winds for crypto.

According to Santiment’s X post, experts expect a 3.4% year-over-year (YoY) increase in the country’s inflation between May 2023 and 2024. 

The U.S.-based spot Bitcoin exchange-traded funds (ETFs) have experienced their second-best-ever joint net inflow day, with preliminary data indicating an inflow of 6.6 million.

According to data from Farside Investors, the Fidelity Wise Origin Bitcoin Fund (FBTC) led with an inflow of 8.7 million, followed by Blackrock’s Bitcoin ETF (IBIT) with 4.4 million.

ARK 21Shares Bitcoin ETF (ARKB) was the third-best performer, bringing in 8.7 million in net inflows.

Farside data further indicated that the Grayscale Bitcoin Trust (GBTC) experienced a rare inflow day, netting .2 million. It marks the seventh inflow day for GBTC since its conversion from a closed-end fund to a spot ETF in January.

GBTC has faced over .8 billion in net outflows, which is attributed to its high management fee of 1.5% compared with 0.25% for the BlackRock fund and even lower, including fee waivers, at rivals.

The Bitcoin ETFs from Invesco Galaxy, Franklin Templeton, WisdomTree, and Hashdex did not see any demand, with each issuer recording no flows for June 4.

Overall, for the ten Bitcoin ETF issuers, Tuesday, June 4, marked the highest net inflow to these funds since March 12, when they recorded over .05 billion in total net inflows.

ETF Store president Nate Geraci responded to Bitcoin critics on X, addressing claims that the Bitcoin ETFs would see minimal demand.

“I was told several months ago that all of the ‘degen retail’ investors who wanted to buy had already done so [and] there was nobody left,” Geraci wrote. “How can this be?”

Meanwhile, Bloomberg ETF analyst Eric Balchunas also took to X to note that it was “big-time flows all around today for The Ten” — referring to the Bitcoin ETFs excluding Hashdex’s.

Hashdex’s Bitcoin ETF (DEFI) entered the market months after the other issuers and has struggled to attract inflows.

Earlier, on May 3, the U.S.-based spot Bitcoin ETFs marked 15 consecutive sessions of net inflows. The surge, combined with a rally in Bitcoin’s price, helped BlackRock’s iShares Bitcoin Fund (IBIT) surpass billion in assets under management for the first time.

According to Balchunas, the ETFs attracted approximately .4 billion in new money over the past month. That would be the third-largest net inflow across the entire ETF market.

“The ability to bounce back with renewed interest after a couple of nasty selloffs is rare for hot sauce-type strategies,” Balchunas said on X. “[It] shows staying power.”

Following the initial excitement over the launch of spot ETFs, inflows slowed significantly in April and even turned negative for several days, a phenomenon experts said was quite normal.