In a galaxy far, far away, where the concept of money is as elusive as a Vogon’s sense of humor, the US spot Bitcoin exchange-traded funds (ETFs) have experienced their largest-ever daily net outflows. And no, it’s not because the Galactic Emperor decided to invest in Galactic Coins instead. Bitcoin, the digital currency that’s as volatile as a bowl of petunias, continues to trade below $90,000.
On Feb. 25, the 11 Bitcoin (BTC) funds collectively saw a net outflow of $937.9 million, marking their sixth straight trading day of outflows, according to CoinGlass data. It’s like a cosmic game of musical chairs, but instead of chairs, it’s money, and instead of music, it’s the sound of investors screaming in agony.
The crypto market has been on a rollercoaster ride, with Bitcoin dropping by 3.4% over the last day, plunging to a 24-hour low of $86,140 from an intraday high of over $92,000. It’s as if the market decided to take a leaf out of the Guide’s book and “Don’t Panic” became the new investment strategy.
The Fidelity Wise Origin Bitcoin Fund (FBTC) led the day’s losses with a record-breaking outflow of $344.7 million. BlackRock’s iShares Bitcoin Trust (IBIT) followed closely with an outflow of $164.4 million. The Bitwise Bitcoin ETF (BITB) lost $88.3 million, while Grayscale’s two funds net lost $151.9 million, split between $66.1 million from its Grayscale Bitcoin Trust (GBTC) and $85.8 million from its Bitcoin Mini Trust ETF (BTC).
Around $2.4 billion has exited the 11 ETFs so far this month, with only four days of net inflows. It’s like a financial black hole, sucking in all the money and leaving behind a trail of empty wallets and broken dreams.
ETF Store President Nate Geraci, in a Feb. 26 X post, expressed his amazement at how much traditional finance (TradFi) despises Bitcoin and crypto. “Huge victory laps at every downturn,” he added. “Hate to break it to you, but no matter how big the drawdowns are, it’s not going away.” It’s like telling a Vogon that poetry is here to stay.
Analysts and industry experts, such as BitMEX co-founder Arthur Hayes and 10x Research head of research Markus Thielen, have noted that the majority of Bitcoin ETF investors are hedge funds seeking arbitrage yields, not long-term BTC investors. Hayes predicted on Feb. 24 that BTC would dump to $70,000 on the continued outflow from spot ETFs. He explained that many IBIT holders are hedge funds that went long on ETFs while shorting CME futures to earn a yield greater than that from short-term US Treasurys.
But when that “basis” yield falls with BTC price, these funds will unwind their IBIT positions and buy back CME futures. It’s like a cosmic game of cat and mouse, where the cat is the market and the mouse is the investor’s sanity.
Thielen, whose research on Feb. 24 revealed that more than half of spot Bitcoin ETF investors were funds playing the ETF arbitrage game, said the unwinding process is “market-neutral” since it involves selling ETFs while simultaneously buying Bitcoin futures, effectively offsetting any directional market impact. It’s as if the market is trying to balance on a unicycle while juggling flaming torches. Good luck with that.
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2025-02-26 09:16