Bitcoin defied expectations after outflows from US Bitcoin ETFs last week. The price surged over 7% to reach over 70K, the highest in over a week. This rally extended to other digital assets with Ethereum, Solana, and other coins all experiencing gains above 4%.
Despite the positive price movement, nearly $900 million was pulled out of Bitcoin ETFs, with significant contributions from the Grayscale Bitcoin Trust and a slowdown in subscriptions to newer offerings. This outflow represents one of the worst weeks for these funds since their launch in January. Reported by Bloomberg, analysts believe strong buying interest around $60,000 is fueling the rebound, highlighting continued investor appetite for Bitcoin despite the recent spot Bitcoin ETF withdrawals.
Bitcoin ETFs have been a major contributor to the cryptocurrency’s record-breaking price increase in 2024. Significant inflows into these funds fueled investor confidence in a surge of Bitcoin adoption by a broader audience. However, last week’s substantial outflows caused traders to increase protective hedges against a price decline. This also led to a wave of liquidation in bullish bets using leverage in the Bitcoin futures market.
The launch of spot Bitcoin ETFs in January provided investors with a convenient way to gain exposure to Bitcoin without the complexities of directly owning and storing the cryptocurrency. Unlike futures-based ETFs introduced in October 2021, spot ETFs hold the underlying Bitcoin asset and eliminate the need for position rollovers. Since their launch, the price of Bitcoin has surged over 50%.
BTC ETFs around the globe
As of the latest CoinGecko study, there were 32 spot Bitcoin ETFs offered globally across 10 countries, with the US, Canada, and Europe being the primary markets. The US dominates the market share at over 83%, followed by Canada at 7.4% and Europe at 8.8%. These ETFs hold a combined $41.74 billion in assets, representing roughly 4% of the total Bitcoin supply.
Grayscale Bitcoin Trust (GBTC) remains the biggest player with over half of the market share ($22.83 billion), but faces potential challenges from outflows. The top 10 spot Bitcoin ETFs control a whopping 92.7% of the market, with major players like iShares Bitcoin Trust (IBIT) and Fidelity Wise Origin Bitcoin Fund (FBTC) following closely behind GBTC. The first spot Bitcoin ETFs launched in 2020, with 2021 seeing a surge in popularity (14 new launches) following the Bitcoin bull run. The US approvals in 2024 further expanded the market, and it remains to be seen if more countries will join the trend this year.
Promising news for UK investors
The London Stock Exchange (LSE) is set to launch a market for Bitcoin and Ethereum exchange-traded notes (ETNs) on May 28. This follows a shift in stance by the UK’s Financial Conduct Authority (FCA), which previously banned the sale of crypto ETNs to retail investors in January 2021. The FCA’s March 11 statement indicated they would not object to listings as long as the products are restricted to professional investors.
This move is seen as a significant step towards making the UK a more crypto-friendly environment. The LSE will begin accepting applications for these physically backed ETNs on April 8, with a deadline of April 15 for those hoping to be listed on the launch date. Issuers must submit a prospectus for FCA approval and demonstrate the underlying assets are held “wholly or principally in cold storage.” The exchange’s decision to launch on May 28 aims to maximize the number of issuers participating on the first day of trading.
Both ETFs and ETNs both track an underlying investment benchmark, but their structures differ. ETFs function like a basket of assets, holding the actual shares that mirror the benchmark. In contrast, ETNs are unsecured debt notes issued by a financial institution, essentially borrowing money from investors to track the benchmark’s performance.
The future of spot Bitcoin ETFs
Spot Bitcoin ETFs, which directly hold the cryptocurrency, have seen inflows exceeding expectations. According to broker JMP Securities, these inflows could reach a staggering $220 billion over the next three years. This significant influx of new capital could potentially quadruple the price of Bitcoin, pushing it to $280,000 based on JMP’s analysis of the multiplier effect on price.
Moreover, JMP Securities believes that the recent ETF approval is merely the first step in a “longer process of capital allocation” towards Bitcoin. To support their claims, JMP points to the record-breaking net inflows of 14,706 Bitcoin (over $1 billion) on a single day, highlighting the growing investor interest in this new financial instrument.
*Disclaimer: News content provided by Genfinity is intended solely for informational purposes. While we strive to deliver accurate and up-to-date information, we do not offer financial or legal advice of any kind. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial or legal decisions. Genfinity disclaims any responsibility for actions taken based on the information presented in our articles. Our commitment is to share knowledge, foster discussion, and contribute to a better understanding of the topics covered in our articles. We advise our readers to exercise caution and diligence when seeking information or making decisions based on the content we provide.
