ETFs
Bitcoin ETFs Are Back With Nearly $1 Billion in Fresh Cash
Bitcoin rebounded strongly from its April plunge last week, improving the performance of recently launched Bitcoin spot ETFs.
On May 15, the BTC price rose from $61,800 to $66,000 and is now trading above $68,500 for the first time in over a month, according to CoinGecko data. At the same time, net inflows into Bitcoin investment products globally exceeded $942 million, eclipsing the previous week’s $144 million and reversing four consecutive weeks of net outflows previously.
According to CoinShares, the sudden resurgence in demand for Bitcoin is directly linked to changing macroeconomic conditions.
“The capital inflows were an immediate response to the lower-than-expected CPI report. Wednesdaywith the last three trading days of the week accounting for 89% of total flows,” the company’s head of research, James Butterfill, wrote in a statement. Monday blog post.
Butterfill later told Decrypt that investor demographics in Bitcoin ETFs are particularly revealing.
“What we’ve seen so far is the largest allocations are either hedge funds or private equity funds,” he said. “There are some isolated allocations to large pension funds, which is very encouraging as fewer niche funds are buying Bitcoin.”
“But so far, the distribution highlighted by the 13F filings represents only 25% of the total holdings,” he continued, explaining that “it is likely that we will get much more detail” d here’s the final filing deadline, July 15.
Bitcoin price movements are historically correlated with central bank policy expectations, with prices rising as interest rates fall, and vice versa.
As April CPI inflation rose just 0.3% month over month, markets regained confidence that the Fed could soon conclude its battle to slow inflation. rising prices across the country. This should lead to lower interest rates, cheaper debt and higher valuations for stocks and cryptocurrencies.
According to CME FedWatchMarkets are 50% confident that the Fed will first cut interest rates by 25 basis points in September.
In addition to the changing macroeconomic outlook, many large US investors disclosed their allocations to Bitcoin spot ETFs as part of mandatory 13F filings this month. At the end of the first quarter, exactly 944 unique filers, each controlling over $100 million in assets, reported holding $10.7 billion in Bitcoin ETF shares. These holdings represent more than 20% of the total assets of these ETFs.
One of these investors included the Wisconsin State Investment Councilwho held $163 million in BTC in BlackRock and Grayscale’s Bitcoin ETFs as of March 31. Overall, the pension fund held $155 billion in assets as of the fourth quarter of 2023.
In a note Last week, Bitwise CIO Matt Hougan said the filings made him “incredibly bullish” on ETFs, as massive asset managers who had already invested would likely allocate more over time.
“Hightower Advisors may for example have $68 million allocated to Bitcoin ETFs today, which is great, but that’s only 0.05% of their assets,” he noted. If that figure were to ultimately reach 1% — as it does for most investors, according to Hougan — that would mean a $1.2 billion allocation from Hightower alone.
In his comments on Decrypt, Butterfill agreed that there is plenty of room for growth, since investment advisors currently dominate the space based on total assets under management, but don’t hold many of them.
“The average portfolio size is very small, implying that investors are just getting started in the market and may well devote more to it as their confidence improves,” he said.
In other Bitcoin ETF news, Michael Sonnhenshein, CEO of the world’s largest such fund, Grayscale, resigned of his position on Monday, saying that “the crypto asset class is at an important inflection point and this is the right time for a smooth transition.”
Edited by Ryan Ozawa. Updated to add comments from CoinShares Head of Research James Butterfill.