Spot Bitcoin exchange-traded funds (ETFs) finished another week on the US stock exchanges, continuing to generate positive sentiment among Bitcoin holders. Despite initially sparking bullish market sentiment, the ETF’s debut did not send Bitcoin’s value above resistance levels and instead triggered a ‘sell the news’ reaction that sent BTC price to new lows this week. Additionally, we have seen investor interest in ETFs decline this week, a trend reflected in on-chain data.
Spot Bitcoin ETF inflows reach new lows
This week, interest in spot Bitcoin ETFs declined due to low inflows after Bitcoin traded near $38,000. Enthusiasm for the highly anticipated spot Bitcoin ETF appears to be waning, with Wednesday recording the lowest daily investment inflows since its launch on January 11.
The latest set of nine ETFs received approximately $245 million in inflows as of January 24, according to on-chain data. However, if you calculate the outflow of Grayscale Investment’s spot Bitcoin ETF, about $403 million was withdrawn on the same day. This means that there has been a net outflow of collective funds for three consecutive days. Notably, these outflows occurred solely from the Grayscale Bitcoin Trust (GBTC), which was transferred from the trust to an ETF with the approval of the U.S. Securities and Exchange Commission.
Additionally, the Netflow indicator reached its lowest point on January 24, reaching -$158 million. This is a significant decrease from the peak of $477 million just a week ago.
Recent data highlighting a significant decline in netflow and record lows in total daily investor inflows into spot Bitcoin exchange-traded funds (ETFs) indicate a notable decline in investor interest in these funds over the past week.
Declining interest in Bitcoin ETFs could affect Bitcoin prices in several ways. First of all, ETFs often give us an idea of what investors think about BTC in general. With less money going into Bitcoin ETFs, investors no longer seem to be interested in Bitcoin. This decrease in excitement could cause people to feel more negative about the market, causing the price of Bitcoin to fall.
Additionally, if money starts flowing out of non-ETFs, it suggests investors may be moving their money elsewhere, either because they’re looking for safer options or because they’re worried about how the market is doing. As people pull money out of Bitcoin ETFs, demand for Bitcoin decreases. Low demand usually means low prices.
Key Reason: FTX Sells $1 Billion GBTC
Looking at the details, we see a significant decline in daily trading volume for ETFs, falling by almost half in just one week. Figures show that daily trading volume for spot Bitcoin ETFs has fallen from an average of $2.5 billion two weeks ago to about $1.3 billion last week. Despite this decline, total trading volume now stands at nearly $25 billion.
Many of the withdrawals from Grayscale’s recently converted Bitcoin fund, which was converted to an ETF, were triggered by the bankrupt FTX.
The bankrupt cryptocurrency company liquidated its entire stake in Grayscale Bitcoin Trust, selling 22 million shares worth $900 million, according to reports from anonymous sources and supporting data. This helped Bitcoin test the $38,500 level last week.
However, other ETF providers continue to accumulate more Bitcoin amid GBTC outflows. The amount of Bitcoin purchased by these ETFs (102K BTC) represents more than half of the total Bitcoin holdings accumulated by MicroStrategy, a major BTC investor, over the past three years. According to MicroStrategy’s latest Bitcoin acquisition report, as of December 26, 2023, the company holds a total of 189,150 BTC.
No other ETF provider has witnessed such declines, with GBTC’s market share falling from 64% to 39% last week, while BlackRock’s market share surged from 18.7% to 29%. This prevented a shift in market sentiment amid continued declines in trading volume for spot Bitcoin ETFs.