Place Bitcoin ETF in the United States marked its worst day on record on Wednesday, recording more than half a billion dollars in net outflows for the first time since their January debut.
As the price of Bitcoin fell to its lowest point in two months Spot Bitcoin ETFs saw net outflows of $563 million on Wednesday, according to data from CoinGlass— far surpassing the previous record of $326 million in daily net outflows recorded in mid-March.
The outsized hemorrhage of Bitcoin funds came as the Federal Reserve asserted that its fight against inflation was likely far from over. The US central bank kept interest rates at their highest levels in more than 23 years following its May policy meeting.
At the same time, Fed Chairman Jerome Powell said tighter monetary policy that could weigh on risky assets like stocks and crypto was “unlikely» to be next. Following his remarks, Bitcoin soared to $58,500, but it remains down 8% over the past week.
As the sell-off materialized on Wednesday, BlackRock's Bitcoin spot ETF saw outflows for the first time. Raising $15.4 billion uninterrupted since its launch on Wall Street, the iShare Bitcoin Trust (IBIT) has seen capital outflows of $37 million, according to Distant investors.
At the same time, Grayscale’s Bitcoin Trust (GBTC), which saw more than 17 billion dollars in cumulative outings since January, it was not he who caused the most significant hemorrhage on Wednesday. Instead, holders of Fidelity's spot Bitcoin ETF led the selloff, which saw $191 million leave the fund while GBTC saw outflows of $167 million.
Outflows from GBTC – which was converted to a spot ETF in January after a decade on the market – have been linked to the bankruptcy estates of several crypto companies parting ways with shares. Grayscale's 1.5% management fee for GBTC also stands out because other products charge investors approximately 0.25%— offer cheaper alternatives.
Spot Bitcoin ETFs have the potential to “magnify market downturns,” analysts at crypto analytics firm Kaiko wrote in a statement. report released alongside Moody's on Wednesday. “If there is an event that triggers large outflows, ETF issuers will need to liquidate their holdings, which could weaken values in crypto markets,” it says.
As of mid-March, spot Bitcoin ETFs had $63 billion in assets under management (AUM). But amid Bitcoin's recent decline, the market value of their Bitcoin holdings (plus a tiny amount of cash) fell 19% to $51.4 billion.
With net outflows on Wednesday representing 1% of spot Bitcoin ETF assets under management, the outflows looked “completely normal for (a) risk asset ETFs during (a) sell-off,” Eric Balchunas, Senior Analyst ETFs at Bloomberg. said on Twitter. However, if the Bitcoin “correction” worsens, he said ETF assets under management could fall by 10% – and he “wouldn’t be surprised.”
Although spot Bitcoin ETFs saw net outflows of more than half a billion dollars on Wednesday, the price of Bitcoin is still up 33% year to date, in part due to the dynamics of supply and demand introduced by the products.
“The flywheel works both up and down,” pseudonymous crypto trader WhalePanda said on Twitter of spot Bitcoin ETFs, adding that the outflows are not “a surprise since panic is everywhere.”