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Not long ago, spot Bitcoin ETFs were the hottest thing in the fund industry. Those were the days, eh?
About $6.4 billion flowed out of the products over the past month, marking the category’s largest 30-day pullback on record. Bitcoin itself has fallen roughly a third this year, now trading under $60,000. Meanwhile, the once-soaring iShares Bitcoin Trust ETF (IBIT), which neared $100 billion in assets last October, currently manages about half that. Investors are trimming risk amid concerns about higher interest rates and broader market uncertainty. But, even amid a new crypto winter, there are opportunities for advisors.
“Investors got out over their skis and have just seen the continued deleveraging of the system, which has led to more selling, which has led to more deleveraging, which has led to more selling, and more deleveraging,” said Ryan Rasmussen, head of research at Bitwise. “This is typical in Bitcoin cycles, which historically have run every four years … that’s what’s happening here.”
Taking Hits on All Sides
The crypto trade is facing headwinds from several directions. Interest rates are expected to go up, which is historically bad for assets like Bitcoin. Assets are rotating toward AI stocks, with the recent SpaceX public offering and anticipated debuts of Anthropic and OpenAI. Then there are the forced sellers, who are unwinding positions, said Don Friedman, the CEO of the Digital Assets Council of Financial Professionals. “This is mechanical, non-directional selling, rather than a bearish bet,” he said.
The three largest Bitcoin ETFs have all seen significant outflows this year:
- iShares Bitcoin Trust ETF, with $47.2 billion currently under management, shed $475.8 million in assets this year, as of the closing bell on Friday, according to data from ETF.com.
- Fidelity Wise Origin Bitcoin Fund, with $11.3 billion in assets under management, lost $1.6 billion.
- Grayscale Bitcoin Trust ETF, with $8.7 billion under management, dropped $1.9 billion in assets.
Spring Is Coming: While we’re in the midst of another crypto winter, the theory behind Bitcoin remains robust and there are a couple of long-term tailwinds for crypto as an asset class, said Rasmussen. “If you think that the world’s money supply is going to continue to grow … then the need for assets like gold and bitcoin will continue to grow,” he said. Plus, with the upcoming great wealth transfer, younger investors tend to favor digital assets over traditional assets like gold. “Most of the wealth managers we speak to who hold Bitcoin positions already are maintaining those positions or adding to them during this drawdown, and those that don’t hold it are considering this as a good entry point.”
