This week, two of the most successful exchange-traded fund launches in history showed signs of abating interest. On Wednesday and Thursday, BlackRock‘s spot Bitcoin ETF, IBIT, which has been winning the “cointucky derby” by a margin, saw zero inflows, according to CoinGlass data.
This ended its 71-day streak of fresh investments, which totaled around $17.24 billion in assets under management since the product was approved for trading Jan. 11. Also, on Thursday, Fidelity’s FBTC, the current runner-up in the ETF race, reported losses of $22.6 million, its first reported outflow, taking its assets under management to around $9.9 billion, according to CoinGlass data.
The easing interest in the two leading Bitcoin ETFs (excluding Grayscale’s GBTC) is a key indicator of the cryptocurrency market cooling over the last month, and a suggestion that the initial ETF frenzy that caused Bitcoin to skyrocket, has settled. Currently trading at around $63,500, Bitcoin has dropped approximately 12% since its all-time high of $73,000 in March. On Thursday, only one of the 10 trading spot Bitcoin ETFs, Franklin Templeton’s EZBC, reported inflows.
While $IBIT's daily inflow streak is over at 71 days, it is not done setting records. Here's a look at ETFs all time by assets after first 72 days on market. The league of own-ness of IBIT, FBTC et al shows how overheated it all was, a breather was overdue tbh @thetrinianalyst pic.twitter.com/CwarhzTOIC
— Eric Balchunas (@EricBalchunas) April 25, 2024
Disappointing inflation data has slashed hopes for Federal Reserve interest rate cuts, and higher-for-longer borrowing costs typically dampen the market’s appetite for riskier, more volatile investments like crypto. Meanwhile, Bitcoin has treaded water since early March, partially reflecting ETF stagnation but also in the run-up to the network’s so-called “halving” that occurred on April 19, as “buy the rumor, sell the news” investors liquidated their holdings.
It’s typical to see ETF flows follow the performance of the underlying asset, so a pause in Bitcoin’s price is likely resulting in a shorter-term hiatus in inflows, Nate Geraci, president of the ETF Store, told Fortune, but the products are still “extremely early” in adoption.
Many large institutions “have yet to even allow their brokers to solicit purchases of spot bitcoin ETFs, and registered investment advisors are still slowly wading into the category,” Geraci added. “The bottom line is that flows in any ETF category aren’t going to go up in a straight line—they’ll ebb and flow over time.”
Despite the recent stagnation, the funds are largely considered to be a runaway success, amassing over $54 billion in assets in just over three months of trading, putting Bitcoin-tracked assets in the portfolios of millions of mainstream investors.
One testament to their success: Last week, Hong Kong’s Securities and Futures Commission granted approvals for three spot Bitcoin and Ether ETFs, which will begin trading on Tuesday, with further countries expected to follow suit. Issuer Harvest is waiving a management fee for its funds, which some anticipate will trigger a fee war similar to the heated one in the U.S., where Grayscale announced a Bitcoin Mini Trust with ultralow fees of 0.15% in a bid to capture some of the outflows from GBTC, which charges 1.5%.
