Bitcoin The massive fall from a record price above $126,000 last October has clouded sentiment across the world. crypto landscape. Confidence has been shaken in a trade that was seen as a digital rival to gold as a store of value, and by others as a risk asset that could continue to explode alongside a crypto-friendly Trump administration.
Since last October’s record price, bitcoin has lost nearly half its value and its inability to rebound in trading has sparked fears of a new “crypto winter” – a prolonged crisis similar to the time of the FTX crash in 2022, when bitcoin fell from almost $50,000 to $15,000. In the last month alone, bitcoin has fallen more than 25%.
But crypto investing experts on CNBC’s latest “ETF Edge” say a review of recent inflows and outflows from Bitcoin and crypto exchange funds suggests long-term investors aren’t abandoning the asset class. Money is certainly gone, but not to a level that suggests long-term investor panic.
Over the past three months, the iShares Bitcoin Trust (IBIT) recorded net outflows of approximately $2.8 billion. That’s substantial, but over the past year, the BlackRock ETF has attracted nearly $21 billion in net inflows, according to VettaFi. The broader category of spot Bitcoin ETFs shows a similar trend. Over the past three months, the ETF asset class has seen net outflows of approximately $5.8 billion. Over the past year, across all spot Bitcoin ETFs, net inflows remained positive at $14.2 billion. The money is flowing out, but the majority of the assets remain in place, and some ETF experts say the money being withdrawn is not coming from the long-term investor or financial advisor who started allocating it to the asset class.
“It’s not ETF investors who are driving the sales,” Matt Hougan, CIO of Bitwise Asset Management, said on “ETF Edge.”
He says much of the broader pressure on bitcoin could come from crypto investors who have accumulated positions over many years and are now reducing their exposure. “It’s really a two-sided story,” Hougan said. He also said that there are hedge funds and short-term traders who use the most liquid ETFs as tools and can quickly withdraw capital when momentum turns negative.
At CNBC’s Digital Finance Forum last week, Galaxy CEO Mike Novogratz said the crypto market’s “era of speculation” may be ending and future returns will look more like a long-term investment. “These will be real-world assets with much lower yields,” he said last Tuesday at the CNBC event in New York. “Retailers aren’t getting into crypto because they want to make 11% in annualized terms,” he said. “They come in because they want to win 30 to one, eight to one, 10 to one.”
Financial advisors Wall Street banks are among those adding bitcoin to investors’ portfolios, and add their own branded crypto ETFs. And longer-term investors who hold a small allocation of crypto within diversified portfolios might be willing to ride out the volatility, Hougan said. If investors capitulated across the board, capital outflows over the past three months would likely approach the magnitude of capital inflows over the previous 12 months.
Not that analyzing ETF asset flows makes it any easier for a recent crypto investor. “It’s tough to be a Bitcoin investor right now,” Will Rhind, founder and CEO of ETF company GraniteShares, said on “ETF Edge.” He added that the performance of other “hard” assets, such as goldadded to Bitcoin’s distress. For investors who supported the Concept of “digital gold”the fall in the price of Bitcoin has been troubling. “This is not supposed to happen,” he said of a period when other safe-haven assets are performing strongly and bitcoin continues to decline. When bitcoin falls almost 50%, “gold is not expected to reach all-time highs,” he said.
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Performance of the iShares Bitcoin Trust versus the SPDR Gold Shares Trust over the past year.
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