By
Godfrey Benjamin
April 29th, 2024
Bitcoin crossed $52,000 and seems ready for more increase as spot ETFs receive more large inflows, with BlackRock and Fidelity leading.
Bitcoin (BTC) has successfully crossed $52,000 as it continues its recent rally driven by large trading volumes among spot exchange-traded funds (ETFs). According to CoinMarketCap data, BTC is trading at $52,216 after rising nearly 2% in 24 hours and 17% in 7 days.
Spot Bitcoin ETF Inflows Continue Rally
Bitcoin’s price trajectory has been impressive as ETFs continue attracting several hundred million dollars daily. In an X post, Bloomberg Senior ETF Analyst Eric Balchunas announced that the ETF from giant asset manager BlackRock Inc (NYSE: BLK) 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, with $IBIT accounting 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, with Coinbase Inc (NASDAQ: COIN) rising more than 7% and MicroStrategy Inc (NASDAQ: MSTR). Robinhood Markets Inc (NASDAQ: HOOD) gained over 15%, while crypto miners Marathon Digital Holdings (NASDAQ: MARA) and Iris Energy (NASDAQ: IREN) 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.