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Nearly two years after the inception of the Bitcoin ETF sector in the United States, these funds are currently grappling with significant challenges, exacerbated by mounting concerns regarding a potential bear market in the coming months.
This turmoil is exemplified by the BlackRock iShares Bitcoin Trust ETF (IBIT), which experienced its largest single-day withdrawal since launch, further contributing to the decline in Bitcoin’s price.
The recent outflows from BlackRocks Bitcoin ETF highlight the severity of the current selloff within the Bitcoin market, which has experienced a substantial correction below the crucial $100,000 mark following a record high reached in October.
This downturn emphasizes the widespread pullback affecting various risk assets, while gold has notably remained resilient. Some analysts suggest that these developments indicate a trend of investors shifting their exposure from Bitcoin to gold.
“The crypto market entered a hangover in August,” said Thomas Perfumo, Global Economist at Kraken, in a recent interview with Reuters, noting that much of the earlier demand for Bitcoin had been fueled by borrowed funds. He added, “Momentum seemingly peaked during the summer. But the truth is this hangover trend started months ago.”
Analysts have also pointed to profit-taking behaviors among long-term holders and increasing caution among Bitcoin ETF funds and digital asset treasury (DAT) firms, which had previously ramped up their acquisitions throughout the year.
Brian Vieten, a research analyst at Siebert Financial, stated that Bitcoin treasury companies had collectively purchased nearly $50 billion worth of Bitcoin over the past year.
Recently, however, many of these firms have begun trading at a discount to their net asset value, which could dampen market expectations for new Bitcoin purchases in the near term.
This shift occurs amid rising concerns among heavyweight investors regarding inflated valuations across various asset classes. Jos Torres, a senior economist at Interactive Brokers, noted that “an ongoing lack of speculative spirits is weighing on Bitcoin.”
Despite managing over $73 billion in assets, IBIT has seen a decline of 19% in the current quarter. Data from SoSoValue indicates that spot Bitcoin ETF funds collectively have recorded $2.59 billion in outflows this month alone.
Leading the pack is BlackRocks Bitcoin ETF, which has experienced $1.78 billion in outflows in November alone. The Fidelity Wise Origin Bitcoin Fund (FBTC) ranks second, with nearly $540 million in outflows.
The turbulence isn’t limited to Bitcoin; the Ethereum exchange-traded fund sector also faced outflows, totaling approximately $74.2 million yesterday, with BlackRock selling off $165.1 million.
On a more positive note, Solana spot ETFs reported net inflows of $30.09 million on Tuesday, primarily driven by Bitwise’s BSOL. This marks a major streak of 15 consecutive days of inflows for Solana.
Featured image from DALL-E, chart from TradingView.com