Bitcoin ETF Inflows Exceed $500 Million, However Investors Express Worries
On October 14th, Bitcoin exchange-traded funds (ETFs) experienced an all-time high in inflows, totaling $555.9 million—the largest daily net influx since June, as reported by Farside Investors.
This uptick in ETF interest coincided with Bitcoin hitting a two-week peak, trading at $66,500 at the time of reporting.
The vanguard was led by Fidelity’s FBTC, which recorded a substantial $239.3 million entry, marking its highest inflow since June 4th.
Among other noteworthy ETFs were Bitwise’s BITB with inflows of $100.2 million, BlackRock’s IBIT at $79.5 million, and Ark 21Shares’ ARKB with just under $69.8 million.
Grayscale’s GBTC saw its first surge in October with $37.8 million, the most significant since May.
Insights from Leaders in the Field
Discussing the development, Nate Geraci, President of ETF Store, observed that Bitcoin ETFs have attracted a notable $18.9 billion in net inflows since their launch in January.
Excluding GBTC, the nine freshest Bitcoin ETFs collectively held approximately 646,000 BTC, with GBTC contributing 223,000 BTC to the overall count.
Collectively, these funds manage 869,000 BTC, making up around 4% of Bitcoin’s total circulating supply.
The ETF sector has witnessed phenomenal expansion this year with almost 2,000 launches, including prominent players like BlackRock and Fidelity. Bloomberg’s Eric Balchunas commented on this trend, saying:
Remaining Concerns
Despite the recent surge, BTC ETFs still only represent a small portion of the broader Bitcoin trading arena.
Based on data from Checkonchain dated October 11th, the Bitcoin Futures market recorded $53.4 billion in trades, with the spot market accounting for $4.5 billion.
On the flip side, ETF transactions only amounted to $2 billion, capturing roughly 3% of the day’s total BTC market volume.
This small slice underscores the fledgling status of ETFs within the extensive Bitcoin market landscape.
Moreover, determining the exact proportion of ETF inflows driven by the “basis trade” or cash and carry exchange remains a challenge.
Key Players in the ETF Arena
Established institutions such as Goldman Sachs and Jane Street Capital partake in crafting and redeeming ETF shares, thereby enhancing the stability and liquidity of ETFs.
Hedge funds like Millennium Management and Capula Management leverage “basis trading” methods to capitalize on price discrepancies between Bitcoin’s spot and futures markets.
However, not all major holders engage in basis trading; some, like the State of Wisconsin Investment Board, acquire ETFs for diversification purposes.
Nevertheless, Bernstein, a private wealth management company, proposes that basis trades could potentially drive wider adoption, as heightened liquidity and trading activity could prompt investors to hold steadfast positions in Bitcoin for the long term.
What Lies Ahead?
If options linked to IBIT are sanctioned and settled physically, it is anticipated that more sophisticated investors would be drawn in.
In such a scenario, strategies like covered calls (selling call options while retaining the underlying asset) would permit investors to generate passive income, while miners could utilize these options to hedge their holdings.
Ultimately, these elements could usher in increased maturity and volume to the Bitcoin ETF market.