Bitcoin ETFs Suffer Record $1 Billion Outflow in One Day

Investors Yank Over $1 Billion from Bitcoin ETFs Amid Market Volatility

Investors pulled out more than $1 billion from spot Bitcoin exchange-traded funds (ETFs) on Tuesday, marking the largest one-day outflow since the group’s debut in January. The Fidelity Wise Origin Bitcoin Fund (FBTC) and iShares Bitcoin Trust ETF (IBIT) saw the steepest outflows, according to data compiled by Bloomberg.

Bitcoin’s Price Faltering

The world’s largest digital asset has been under pressure, with its price sinking to its lowest level since mid-November after hitting an all-time high earlier this year. Other cryptocurrencies also slid, with an index tracking top digital tokens on pace for its largest four-day drop since early August.

Contrasting Moves in Stock Market

While Bitcoin funds are seeing an exodus, investors took advantage of a recent stock sell-off to add nearly $7 billion combined to the Invesco QQQ Trust (QQQ) and SPDR S&P 500 ETF Trust (SPY).

Industry Experts Weigh In

"Digital assets are still very retail-flow driven, despite institutional flows over the past 12 months," said Geoff Kendrick, global head of digital assets research at Standard Chartered. "This sets them apart from equities and fixed income. In my opinion, this means the average hand is weaker or has less deep pockets to ride losses. Hence more pain is likely."

Kendrick predicts Bitcoin will trade even lower – at around the $80,000 range – at which point he will "buy the dip".

Basis Trade Unwinding

Matthew Sigel, VanEck’s head of digital-asset research, believes the record outflows likely stem from hedge funds unwinding a popular trading strategy called the basis trade, which exploits differences in prices between spot and futures markets. Some have used the ETFs to profit from the cryptocurrency’s volatility or offset a short position in derivatives.

Lessons from the Crypto Arena

Stephane Ouellette, chief executive officer and co-founder of FRNT Financial, suggests that investors newer to the crypto arena, who are generally considered more likely to panic, have driven the outflows. "Those investors are less indoctrinated into the space, simply due to the fact that they do not have their own infrastructure to hold physical BTC," he said.

Conclusion

The recent outflows from Bitcoin ETFs may be a sign of a broader shift in investor sentiment, as the market faces increasing uncertainty and volatility. As the digital asset’s price continues to fluctuate, it remains to be seen whether investors will continue to pull out or find new opportunities in the space.

FAQs

Q: What was the largest one-day outflow from Bitcoin ETFs?
A: Over $1 billion.

Q: Which Bitcoin funds saw the steepest outflows?
A: Fidelity Wise Origin Bitcoin Fund (FBTC) and iShares Bitcoin Trust ETF (IBIT).

Q: What is the basis trade, and why is it relevant to the outflows?
A: The basis trade is a popular trading strategy that exploits differences in prices between spot and futures markets. Hedge funds may have used ETFs to profit from the cryptocurrency’s volatility or offset a short position in derivatives, but have since unwound their positions, leading to significant redemptions.