Bitcoin spot exchange-traded funds (ETFs) faced their biggest slump in over four months on Tuesday, as investors withdrew significant funds amid a broader market decline. The sell-off was part of a larger trend in the financial markets, which saw heavy withdrawals across various assets.
Major Outflows from Bitcoin ETFs
On Tuesday, investors pulled out more than $287 million from 11 U.S.-listed bitcoin ETFs, marking the highest level of outflows since May 1, according to data from Farside Investors. These ETFs, which were introduced in January following approval by the U.S. Securities and Exchange Commission (SEC), allow financial firms to bundle bitcoin similar to how they manage stock and bond ETFs.
Fidelity led the charge in redemptions, with over $162 million in shares sold from its FBTC fund. Grayscale, another prominent player in the market, saw outflows of $50.4 million, adding to its ongoing struggle with a total net outflow of more than $19.8 billion since it converted its trust to an ETF earlier this year. Additionally, Ark 21Shares saw investors pull out $33.6 million, while Bitwise’s BITB fund experienced $25 million in sales.
Cooling Enthusiasm and Falling Bitcoin Prices
The initial excitement surrounding bitcoin ETFs has faded significantly after their record-breaking debut earlier in the year. Currently, bitcoin ETFs hold approximately $52.6 billion in assets, a notable decline of $10 billion from their peak.
A significant factor in this drop is the falling price of bitcoin itself. After reaching a record high of over $73,000 in March, the cryptocurrency has since dropped to around $58,400. On Tuesday, bitcoin lost nearly 3% of its value, mirroring the downward trend in the stock market due to weak manufacturing data that raised fears of an economic slowdown. This marked the fifth consecutive day of outflows from bitcoin spot funds.
Ether spot ETFs, which were introduced in July, have also had a rough period. The price of ether fell by nearly 6% on Tuesday, triggering large withdrawals from related ETFs. JPMorgan analysts noted that much of the outflows in ether funds were driven by Grayscale, with investors selling over $52 million in shares from its ETHE product.
Institutional Involvement and Future Outlook
Despite the recent market struggles, institutional interest in bitcoin ETFs remains. Quarterly disclosures from the SEC revealed that institutional ownership of bitcoin ETFs increased to 24% by the end of the second quarter. Goldman Sachs made its first venture into crypto ETFs during this period, buying $418 million worth of bitcoin funds. Meanwhile, Morgan Stanley, which had already been involved in the crypto market, reduced its holdings from $270 million to $189 million over the latest quarter.
While bitcoin and ether ETFs face challenges, they continue to attract significant attention from institutional investors, suggesting that the long-term outlook for these funds remains a topic of interest in the financial world.