Bitcoin ETF Net Inflows Near $1B After Three Days

In just three days of trading since the approval of spot Bitcoin exchange-traded funds (ETFs), net inflows have approached a staggering 21,000 Bitcoin (BTC), equivalent to approximately $894 million at the current price of $42,600.

BlackRock’s iShares Bitcoin Trust (IBIT), which has accumulated 16,362 Bitcoin, is leading the way in attracting new investments. Following closely is Fidelity’s Wise Origin Bitcoin Fund (FBTC), boasting 12,112 Bitcoin in net inflows. However, it’s worth noting that significant outflows from Grayscale’s Bitcoin Trust (GBTC), shedding roughly 25,000 Bitcoin, have somewhat offset the overall industry inflow.

Grayscale’s Bitcoin Trust (GBTC) had previously functioned as a closed-end fund until last week when it was converted into an ETF, coinciding with the introduction of similar products by companies like BlackRock. Before the transition, GBTC imposed a 2% management fee and held approximately 630,000 Bitcoin.

While the ETF version of GBTC offers a reduced management fee of 1.5%, it still stands at least 100 basis points higher than its new competitors. Moreover, its transformation into an ETF eliminated the fund’s previous tendency to trade at a discount to its net asset value (NAV). These factors have provided GBTC holders with compelling reasons to sell, as evidenced by early returns indicating such actions.

Nonetheless, the influx of new capital into these ETFs has overshadowed the GBTC outflows, leading to overall net inflows into ETFs.

The cryptocurrency market has exhibited relative stability this week, with Bitcoin primarily trading within the $42,000-$43,000 range. At present, it has experienced a slight decline of just over 1% over the past 24 hours, slightly underperforming the 0.6% drop observed in the CoinDesk 20 Index, which monitors the world’s most prominent and liquid cryptocurrencies.

The launch of Bitcoin ETFs has sparked a debate regarding its success or failure. From the perspective of the ETF industry, these new products have enjoyed resounding success, with a remarkable $10 billion in trading volume recorded during their initial three days. Bloomberg’s Eric Balchunas noted that in contrast, there were 500 ETF launches in 2023, collectively generating just $450 million in trading volume throughout the entire year.

Critics argue that the lackluster price performance since the ETF launch, with Bitcoin declining nearly 10%, the substantial selling activity seen in GBTC, and net inflows, while significant, falling short of some optimistic forecasts in the billions, raise questions about its true impact.

In the words of the late Richard Russell, editor of “Dow Theory Letters,” “Markets make opinions.” Whether the Bitcoin ETFs are perceived as a success or disappointment will largely depend on Bitcoin’s future price trajectory. If prices remain stagnant or decrease, the skeptics may claim victory. However, suppose Bitcoin surges beyond $50,000 this year and approaches its all-time high above $65,000. In that case, the ETFs will undoubtedly be hailed as a significant success story in cryptocurrency investments.