Weekly Spot Bitcoin ETF Report: Insights After Its Second Trading Week

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The Spot Bitcoin Exchange-Traded Fund (ETF) has wrapped up another week on US stock exchanges, continuing to develop positive sentiment among Bitcoin holders. Despite the ETF’s debut initially triggering bullish market sentiments, it didn’t send Bitcoin’s value beyond its resistance levels, instead prompting a ‘sell the news’ reaction that saw BTC prices dipping to newer lows this week. Moreover, this week witnessed a declining investor interest in the ETFs, a trend reflected in the on-chain data.

Inflow Of Spot Bitcoin ETF Touches New Low

This week saw a decline in interest for the spot Bitcoin ETFs as they touch low inflow volumes following Bitcoin’s trade near the $38K mark. Enthusiasm for the highly anticipated spot Bitcoin ETFs seems to be declining, with Wednesday recording the lowest daily inflow of investments since their inception on January 11.

The recent set of nine ETFs attracted approximately $245 million in inflows on 24 Jan, as per on-chain data. However, when accounting for the outflows from Grayscale Investment’s spot Bitcoin ETF, the net result was a withdrawal of about $403 million on the same day. This marks the third day in a row where the collective funds experienced net outflows. Notably, these outflows were solely from the Grayscale Bitcoin Trust (GBTC), which was transferred from a trust to an ETF following the approval by the US Securities and Exchange Commission.

Furthermore, the Netflow metric hit its lowest value on January 24th, reaching -$158 million. This represents a considerable decrease from the high of $477 million recorded just a week earlier.

The recent data, highlighting a significant drop in Netflow and a record low in single-day investor gross inflows for the spot Bitcoin Exchange-Traded Funds (ETFs), points to a noticeable decline in investor interest in these funds over the past week.

The decreasing interest in Bitcoin ETFs might affect Bitcoin’s price in a few ways. First off, ETFs often give us a sense of how investors generally feel about BTC. With less money going into Bitcoin ETFs, it seems like investors are not as excited about Bitcoin anymore. This decreased excitement can make people feel more negative about the market, which might cause Bitcoin’s price to go down.

Also, when money starts moving out of these ETFs instead of into them, it suggests that investors might be shifting their money to different places, maybe because they’re looking for safer options or they’re worried about how the market is doing. When people pull their money out of Bitcoin ETFs, the demand for Bitcoin goes down. Less demand usually means lower prices.

The Main Reason: FTX’s $1 Billion GBTC Sale

Digging into the details, there’s a significant decrease in the daily trading volumes of ETFs, which have fallen by almost half in just a week. The numbers reveal that the daily trading volume of spot Bitcoin ETFs went down from an average of $2.5 billion two weeks ago to about $1.3 billion last week. Despite this drop, the total trading volume has now reached nearly $25 billion.

A large part of the withdrawals from Grayscale’s bitcoin fund, following its recent transformation into an ETF, was triggered by the bankrupt FTX.

The collapsed cryptocurrency company liquidated its entire stake in the Grayscale Bitcoin Trust, selling 22 million shares valued at $900 million, according to reports from anonymous sources and supporting data. This helped Bitcoin to test the $38,500 level last week.

However, other ETF providers continue to accumulate more Bitcoin amid GBTC outflow. The volume of Bitcoin, purchased by these ETFs (102K BTC), represents more than half of the total Bitcoin holdings accumulated by the major BTC investor MicroStrategy over the last three years. As per the latest Bitcoin acquisition report from MicroStrategy, as of December 26, 2023, the company held a total of 189,150 BTC.

It is to be noted that the market share of GBTC has dropped from the peak of 64% to just 39% last week, while other ETF providers have not witnessed this decline as BlackRock’s market share surged to 29% from 18.7%. This prevented a change in market sentiment amid the continuous decline in volumes for spot Bitcoin ETFs.