K33 Research released the latest report revealing that the launch of new U.S. Bitcoin ETFs has garnered significant attention, with an impressive 47,654 BTC in inflows and seeding within the first two days of trading. Despite this success, the overall market response has been lackluster due to substantial outflows from the Grayscale Bitcoin Trust (GBTC) and the new ETFs.
Structural and Psychological Factors Behind Bitcoin (BTC) Tumble
The net positive flow from the U.S. ETF launches stands at 15,540 BTC, reflecting the impact of both structural and basic market psychology factors. GBTC, a star performer in 2023, experienced a remarkable transformation, narrowing its discount to NAV from -45% to 0% in the past seven months, outpacing BTC’s performance. The launch of GBTC at higher fees compared to its peers incentivized investors to rotate funds to other alternatives, contributing to outflows.
Tactical traders, capitalizing on the narrowing discount, seized the conversion as an opportune moment to realize profits. Additionally, heightened expectations surrounding the ETF launch led to selling pressure from traders, exaggerating the directional impact on BTC and contributing to its tumble.
Other U.S. products, including the BITO ETF, faced post-launch outflows, causing selling pressure on CME and affecting market dynamics. BITO saw net outflows of 6,975 BTC, coinciding with profit realization on CME and market makers hedging pent-up flow exposure, driving CME’s futures premiums lower.
BlackRock’s iShares and Fidelity’s Wise Origin BTC ETFs emerged as frontrunners, accumulating inflows of $710 million (16,382 BTC) and $524 million (12,132 BTC), respectively, in their first three trading days. In contrast, Grayscale witnessed outflows of $1.173 billion, indicating a significant rotation away from the established fund.
Global Implications, BTC Flows Beyond U.S. Borders
Global implications of the BTC flows were evident as BTC held in exchange-traded products worldwide amounted to 864,719 BTC. Following the U.S. spot ETF approval, Canadian and European BTC ETPs experienced substantial outflows alongside U.S. futures-based ETFs. Despite U.S. spot ETFs netting 20,667 BTC in inflows from January 10 to 16, global outflows from other products resulted in a net five-day inflow of 7,141 BTC.
With U.S. BTC ETFs now representing 80% of the global BTC ETP market, the report anticipates ETF flows to remain a crucial price driver for Bitcoin, especially within the U.S. market. Currently, 4.4% of the circulating Bitcoin supply is held in BTC ETPs globally, a figure expected to rise in 2024 as the market continues to evolve.