Key Points
- Bitcoin (BTC) has crossed the $52,000 mark, driven by large trading volumes among spot exchange-traded funds (ETFs).
- BlackRock Inc’s ETF has surpassed its weekly volume record with an average of $760 million per day.
- Net inflow for all the ETFs was more than $340 million, with BlackRock’s $IBIT accounting for $224.3 million, which is more than 65%.
- Fidelity Investments’ $FBTC ETF recorded $118.9 million, the second largest for the day.
- Grayscale Investments’ GBTC ETF has been recording significant outflows, with the largest on January 22 at $640.5 million.
- The rally in Bitcoin and spot ETFs has influenced gains in crypto stocks such as Coinbase Inc and MicroStrategy Inc.
- Speculations on the long-term health of spot Bitcoin ETFs are uncertain, with some believing that most will not break even unless their individual assets under management (AUM) rise to the billions.
Bitcoin (BTC) has successfully crossed the $52,000 threshold. This recent rally is due to large trading volumes among spot exchange-traded funds (ETFs). CoinMarketCap data shows that BTC is trading at $52,216, a nearly 2% increase in 24 hours and a 17% increase in 7 days.
Rally in Spot Bitcoin ETF Inflows
The price trajectory of Bitcoin has been impressive. ETFs continue to attract several hundred million dollars daily. Bloomberg Senior ETF Analyst Eric Balchunas announced that the ETF from BlackRock Inc had surpassed its weekly volume record on February 14. According to Balchunas, $ IBIT’s average already hit $760 million per day.
Balchunas explained that $ IBIT’s record is interesting because the gains in $IBIT initially seemed reliant on GBTC’s loss. In a follow-up post, Balchunas wrote, “Reason this is interesting and unusual is [because] early on IBIT’s volume was correlated [with] GBTC outflows and perhaps to any ‘lined up’ cash [BlackRock] had. Thought all that would wind down a bit in unison, and it started too, but then IBIT broke the [f–] loose.”
On the same day, a post from BitMEX Research stated that the net inflow for all the ETFs was more than $340 million. $IBIT accounted for $224.3 million, which is more than 65%. Specifically, the $FBTC ETF from Fidelity Investments recorded $118.9 million, the second largest for the day. Since the SEC’s approval, $IBIT has had the largest daily net inflow, at $493.1 million on February 13.
Unfortunately, the GBTC ETF from Grayscale Investments tells a different story. The Bitcoin fund turned ETF has been recording significant outflows, with the largest on January 22 at $640.5 million. The data BitMEX posted shows that the outflows began to slow down after that day, sometimes rising but eventually falling. However, after reducing to $51.8 million on February 9, outflows rose to $131.2 million yesterday. In total, the net inflow since January 11 is $4.118 billion.
Bitcoin ETF Rally Positive for Crypto Stocks But May Be “Race to the Bottom”
The excitement around Bitcoin and spot ETFs has trickled into crypto stocks. Some of these stocks tied to Bitcoin saw interesting gains yesterday in premarket. Coinbase Inc rose more than 7% and MicroStrategy Inc. Robinhood Markets Inc gained over 15%, while crypto miners Marathon Digital Holdings and Iris Energy gained 13% and 19%, respectively.
Unfortunately, speculations on the long-term health of spot Bitcoin ETFs are shaky. According to HANetf co-CEO and founder Hector McNeil, most current ETFs launched “will never break even” if their individual assets under management (AUM) do not rise to the billions. McNeil said while four or five will break even, some of them will close. He believes it’s a “race to the bottom” as there are “too many people fighting over too small a pile”.
At the moment, making a reasonable forecast on the health and projection of each ETF might be premature. Grayscale’s heavy outflow is likely due to its 1.5% sponsor fee, which is significantly higher than others. While it still has the largest volume of AUM, McNeil’s opinion that most will close may favor Grayscale more than cheaper alternatives that might struggle to maintain their health if the heavy inflows reduce.