Bitcoin ETFs Witness First Net Losses
Bitcoin’s rapid depreciation recently has led to the first net losses for the average US spot Bitcoin exchange-traded fund (ETF) investor. This development comes as Bitcoin fell below the average cost basis across all Bitcoin ETFs in the US, which is currently approximately $89,600.
While most Bitcoin ETF holders are long-term oriented and can stomach being ‘underwater,’ the continual fall in Bitcoin price has nevertheless alarmed some investors, resulting in outflows. For instance, on Monday, US spot Bitcoin ETFs experienced a combined outflow of $254.6 million.
Analyst Perspective
According to Glassnode analyst Sean Rose, some early investors are still in the green, particularly those who entered the Bitcoin market when prices ranged between $40,000 and $70,000. However, for late entrants, the recent price contraction has resulted in a loss.
Vincent Liu, Chief Investment Officer at quantitative trading firm Kronos Research, shared similar views. However, Liu emphasized that most ETF holders are major allocators who take a long-term investment outlook and are unlikely to exit hastily due to temporary losses. He noted that prevailing macroeconomic conditions and liquidity are the key determining factors at this juncture.
Record Outflows
Major Bitcoin ETFs experienced significant outflows. BlackRock’s iShares Bitcoin Trust (IBIT) recorded $145.6 million in withdrawals and the Fidelity’s Wise Origin Bitcoin Fund (FBTC) saw $12 million in outflows. ARK 21Shares Bitcoin ETF had a net outflow of $29.7 million, while the Bitwise Bitcoin ETF had net withdrawals worth $9.5 million.
This downturn in Bitcoin ETFs marked the fifth consecutive day of withdrawal, beginning on November 12th when these investment vehicles witnessed a net outflow of almost $278.1 million. The situation worsened on the 13th of November when Bitcoin ETFs collectively lost $866.7 million, recording the second-worst session since their inception.
Spot Ether ETFs Also Affected
Spot Ether ETFs also faced a stiff challenge due to the downturn and observed considerable outflows, losing almost $182.7 million in a single day. BlackRock’s iShares Ethereum Trust ETF (ETHA) was hit the hardest, experiencing an outflow of $193 million.
Liu expressed that a shift will occur with clear disinflation measures, and central banks communicating clear easing tendencies, rather than higher for longer. Once those signals align, liquidity expectations could improve, volatility could dwindle, and investment flows could potentially rotate back.
Solana ETFs Defy Market Downturn
Defying the broader market downturn, Solana (SOL) displayed a contrasting momentum. Solana’s ETFs continued to log another day of positive inflows. The Bitwise Solana Staking ETF (BSOL) attracted $7.3 million in fresh capital, while the Grayscale Solana Trust ETF (GSOL) added a modest $0.9 million to its balance sheet.
Since their launch in late October, Solana’s funds have posted inflows every day, taking the total net inflows in BSOL, VSOL, and GSOL to approximately $390 million. This exhibits the continued market faith in Solana despite the gloomy crypto climate.
In Conclusion, investors need to understand that cryptocurrency markets are volatile and high-risk investments. The recent downturn in Bitcoin and Ethereum ETFs highlights the inherent risks associated with these investment vehicles. At the same time, the strong performance of Solana ETFs also illustrates opportunities inherent in these risky markets. As always, a smart investor is one who is well-informed and invests further taking into account all factors and personal risk tolerance.
