Summary
- In the last three days, Bitcoin ETFs have seen net inflows totaling $510 million.
- 21Shares' James Butterfill suggests that sentiment may be shifting positively.
- Over the past eight weeks, these products have experienced a loss of approximately $8 billion.
Bitcoin exchange-traded funds (ETFs) have recorded three consecutive days of net inflows, signaling a potential recovery from a significant downturn as investors tentatively return to Bitcoin.
Since Friday, these funds have attracted around $510 million in new investments, indicating a change in trend from what was described as the "largest outflow period we’ve ever witnessed," according to James Butterfill, head of research at asset management firm 21Shares, in an interview with Decrypt.
“It seems like sentiment might be improving,” Butterfill remarked. “These inflows are the largest we’ve noted since the outflows began in early May, implying that we might have passed through the worst phase.”
Despite their growing popularity in recent years, Bitcoin ETFs have lost about $8 billion over the last two months as investors sought refuge while the digital asset fell to a 21-month low. Year-to-date, the total outflows have reached $2.8 billion during this challenging period.
As of Wednesday, Bitcoin was trading at approximately $62,000, reflecting a 4% increase over the past week, according to CoinGecko. Earlier this month, the cryptocurrency dipped to around $58,000, deepening its decline from a peak of $126,000 in October.
Butterfill noted that the recent outflow streak corresponds to about 8% of the assets managed in Bitcoin ETFs, similar to patterns observed during previous market lows in 2018. He likened this year's downturn to a significant outflow last February, where $5.2 billion was withdrawn by investors.
Currently, most investors in Bitcoin ETFs are facing losses. The average cost basis for these investments is around $83,800, as reported by Glassnode.
Large holders, often referred to as whales, have offloaded over $40 billion in Bitcoin since the asset's price peaked last year, Butterfill indicated. However, he observed that the selling pressure from these large holders has decreased recently.
Despite this shift among Bitcoin's major stakeholders, Butterfill warned that expectations of tighter monetary policy in the U.S. could hinder Bitcoin from breaking out of its current trading range, as the Federal Reserve continues to address inflation amidst geopolitical tensions in the Middle East.
“We are not in a position to state that the Fed is about to reduce rates, which would greatly benefit Bitcoin,” he added. “Bitcoin is highly responsive to inflation trends and, indirectly, to the conflict in Iran and the Federal Reserve's stance.”
While the recent sell-off of Bitcoin ETFs has set records, the severity has not reached levels observed last year. In this latest downturn, daily net outflows peaked at $733 million, according to CoinGlass, a threshold that was exceeded several times in the previous year.