Bitcoin ETF Hype vs. Reality: 2-Day Inflows Stagnate at $819 Million

• The highly-anticipated launch of 11 US Bitcoin exchange-traded funds (ETFs) resulted in disappointment, with the market experiencing a substantial correction, and the two-day net inflows settling at $819 million, falling short of optimistic projections.
• In contrast, the Canadian Bitcoin ETF saw a successful start, accumulating $421 million in assets within its first two days of trading.

Bitcoin’s recent correction came as a surprise to many after the launch of 11 spot Bitcoin exchange-traded funds (ETFs) in the United States. Despite significant anticipation, the market went in the opposite direction, experiencing a notable drop of approximately 10 percent, with Bitcoin’s value falling from $49,000 to below $42,000. While the cryptocurrency has rebounded, currently trading at around $42,700, the initial ETF excitement did not translate into the expected market enthusiasm.

Disappointing Demand for Bitcoin ETFs

Market expectations were high, with experts predicting that Bitcoin ETFs would ease entry barriers for both retail and institutional investors, allowing them to gain direct exposure to crypto through brokerage accounts. However, the numbers tell a different story. In the first two days of trading, the ten newly listed Bitcoin ETFs garnered only $1.4 billion in new funds, failing to secure top rankings among US ETFs.

Net Inflows and Outflows

Adding to the disappointment, Grayscale’s Bitcoin ETF experienced an outflow of $579 million, while the BITO futures ETF saw $151 million in outflows. Consequently, the two-day net inflows for Bitcoin ETFs in the US amounted to just $652 million, with the net spot Bitcoin ETF inflows standing at $819 million.

Global Contrasts: Canada’s Success

Comparing these figures with other countries, Canada’s Purpose Investments Bitcoin ETF, launched in February 2021, accumulated $421 million in assets under management (AUM) within its first two days of trading. Notably, the AUMs of Bitcoin ETFs by financial giants BlackRock and Fidelity currently stand at $498 million and $422 million, respectively.

Interestingly, while the Canadian Bitcoin ETF charges a 1.5 percent fee, the US ETFs take a more economical approach, with the lowest fees at 0.2 percent (excluding conditional fee waivers).

Long-Term Predictions and Stock Market Impact

Contrary to optimistic projections, Bloomberg’s anticipated $4 billion inflow on the first day and $50 billion by the year’s end, along with Standard Chartered’s even more optimistic prediction of $100 million by the end of 2024, now seem like long-shots.

Meanwhile, the stock price of the largest US Bitcoin exchange, Coinbase, has been on a downward trajectory, plunging about 30 percent from December’s peak. Last Friday’s trading session alone saw Coinbase stock decline 7.35 percent, shedding an additional one percent-point in after-hours trading.

In conclusion, the initial performance of US Bitcoin ETFs raises questions about the industry’s expectations, contrasting sharply with the success of similar ventures in other countries and challenging rosy projections for the future.