BlackRock, one of the most prominent players in the investment world, has recently faced a significant challenge with its Bitcoin exchange-traded funds (ETFs). The latest data reveals a worrying trend: outflows from all 10 U.S. spot Bitcoin ETFs, totaling $563.7 million, marking the largest losses since their inception in January. This trend reflects a broader decline over nearly two months, with the funds shedding around $6 billion in the past four weeks alone, translating to a 20% drop in assets under management.
Even BlackRock’s IBIT, the most successful fund boasting $17.24 billion in assets under management, has not been immune to this trend. For the first time, it experienced outflows, with $36.9 million worth of shares liquidated. The fund’s inflows have stagnated since April 24. Similarly, Fidelity’s FBTC and Grayscale’s GBTC, the two other largest funds, suffered losses of $191.1 million and $167.4 million, respectively.
The primary driver behind these outflows is the declining value of Bitcoin itself. After reaching an all-time high of $73,000 in March, Bitcoin has since plummeted by almost 20%, currently trading near $59,000. This downward trend coincides with the onset of outflows from the ETFs.
Bitcoin ETFs
Several factors have contributed to Bitcoin’s price correction. Following the April 19 halving, investors adopted a “buy the rumor, sell the news” strategy, leading to increased shorting of Bitcoin. Additionally, miners have been selling surplus reserves to offset rising production costs. The Federal Reserve’s dovish fiscal policy, maintaining interest rates at a 23-year high despite two months of disappointing inflation data, has further exacerbated the downward pressure on Bitcoin’s price. As of March 31, inflation stood at 3.48%, up from 3.2% in February, according to the consumer price index.
Despite the challenging market conditions for risk assets like Bitcoin, Eric Balchunas, Bloomberg’s senior ETF analyst, remains optimistic. He views the recent outflows as typical in the early stages of an ETF and believes that the assets and flows will gradually recover over the year. Balchunas also highlights that while some investors may be quick to sell during price declines, the majority appear to be holding on for the long term.
Looking ahead, the future growth of Bitcoin ETFs remains uncertain. The issuers currently lack access to major registered investment advisors and broker-dealer platforms such as Morgan Stanley, JPMorgan, and Wells Fargo. Additionally, while several exchanges have filed to allow the trading of related ETF options, there has been no progress on this front.
Balchunas emphasizes that easy access to Bitcoin through ETFs is not enough to attract mainstream investors. He believes that there needs to be a compelling reason beyond accessibility for investors to buy into Bitcoin. As he puts it, “It’s almost like you put your band’s music on Spotify… But the music has to be the main thing you’re selling.
