U.S. Spot Bitcoin ETFs Experience Outflows Ending Seven-Day Inflow Streak

U.S. Spot Bitcoin ETFs Experience Outflows Ending Seven-Day Inflow Streak

U.S. spot Bitcoin exchange-traded funds (ETFs) have experienced a significant reversal in daily flows as of Tuesday marking the conclusion of a seven-day streak of net inflows. According to data from SoSoValue, the 12 spot Bitcoin ETFs collectively recorded outflows of $79.09 million. This downturn was primarily driven by substantial withdrawals from the Ark and 21Shares ARKB fund which saw a notable loss of $134.74 million.

Mixed Results Amid Outflows

Despite the overall negative trend in ETF flows, some funds still managed to attract investments. Notably, BlackRock's IBIT emerged as a leader in inflows, bringing in $42.98 million in net new capital. Similarly, Fidelity's FBTC fund experienced positive flows of $8.85 million, while VanEck's HODL added $3.82 million.

In contrast, eight other funds, including Grayscale's GBTC, reported no changes in their net flows for the day. The $79 million in outflows effectively reduced the cumulative net inflows for all 12 spot Bitcoin ETFs to $21.15 billion.

Decrease in Trading Activity

The trading activity within these ETFs also saw a decline, with total daily trading volume dropping to $1.4 billion on Tuesday down from $1.76 billion the previous day. This downturn in trading volume and net outflows follows a robust seven-day period during which spot Bitcoin ETFs attracted more than $2.67 billion in inflows. During this stretch, BlackRock's IBIT alone was responsible for pulling in $1.5 billion.

The inflow surge coincided with Bitcoin's impressive rally which saw the cryptocurrency's price spike above $69,400 on Monday. However, on Tuesday, Bitcoin's price dipped 0.38% to $67,038 while Ethereum experienced a 0.99% decline to $2,611. Despite the downturn in prices, U.S. spot Ether ETFs reported net inflows of $11.94 million for the day, entirely attributed to BlackRock's ETHA fund.

Broader Market Sentiment

Last week, the digital asset investment market displayed renewed optimism with a total of $2.2 billion in inflows marking the largest increase since July. This upturn in investor sentiment is believed to be driven by expectations of a favorable outcome for digital assets should a Republican candidate win in the upcoming U.S. elections. Bitcoin played a significant role in this surge with $2.13 billion of the inflows directed towards it while short Bitcoin products also saw notable inflows of $12 million marking the largest since March. Additionally, Ethereum-based products attracted $58 million in inflows with altcoins like Solana Litecoin and XRP also experiencing modest gains.

Record Open Interest in Bitcoin Futures

In parallel with the ETF activity Bitcoin derivatives have reached unprecedented levels as open interest in Bitcoin futures hit an all-time high of $40.5 billion on October 21. Data indicates that the Chicago Mercantile Exchange (CME) holds the largest share of Bitcoin futures open interest accounting for 30.7%. This is followed by Binance with 20.4% and Bybit with 15%.

The surge in open interest is coinciding with Bitcoin's price nearing the $70,000 mark. Open interest reflects the total value or number of outstanding futures contracts that have yet to expire serving as a crucial indicator of market activity and investor engagement in Bitcoin derivatives. An increase in open interest can indicate heightened leverage in the market potentially leading to increased volatility. Periods of high open interest may result in significant market movements especially when prices shift dramatically.

Conclusion

As the U.S. spot Bitcoin ETFs navigate fluctuations in inflows and outflows the broader digital asset market remains on a path of cautious optimism. Investors are closely monitoring the impact of market dynamics including trading volumes and futures open interest as Bitcoin continues to be a primary driver of market activity.