Bitcoin’s Swoon Prompts IBIT Exodus

Bitcoin has hit some turbulence lately.

After reaching a record high of roughly $126,000 in early October, the price of Bitcoin has since fallen below $90,000, dropping about 20% in the past month, and rippling through ETFs that track the cryptocurrency. Investors pulled $523 million out of BlackRock’s iShares Bitcoin Trust ETF (IBIT) in just one day last week, the largest single-day outflow in the fund’s history, Bloomberg reported. Separately, Morgan Stanley unloaded $104 million in complex structured notes tied to the ETF.

So what’s going on? The simplest explanation is that investors are trimming exposure to riskier assets, said Bryan Armour, director of ETF and passive strategies research at Morningstar. “Crypto is a speculative asset and investors look to exit once reaching a specific catalyst,” he said. The recent flood of new crypto ETFs may signal an opportune exit point for speculators hoping to cash out after increased mainstream adoption, he added.

Not So Itty-Bitty

Still, the recent volatility doesn’t necessarily mean investors have turned broadly bearish. Even with outflows and a roughly 13% year-to-date decline, IBIT remains enormous at $70 billion in net assets. The fund took in $4.3 billion in October alone, according to Morningstar Direct. Its only month of outflows this year came in February, when it lost about $150 million.

Some major investors are leaning in, however. Harvard University’s endowment recently tripled its allocation to IBIT, making it the largest public holding in its portfolio. JPMorgan Chase disclosed that it held 5.28 million IBIT shares at the end of September, a 64% jump from June and a notable shift for a bank whose CEO, Jamie Dimon, once dismissed Bitcoin as a “pet rock.”

Other Bitcoin ETFs, however, haven’t fared as well:

• The Greyscale Bitcoin Trust ETF (GBTC) shed roughly $540 million last month and has seen outflows every month this year, per Morningstar data.
• The Ark 21Shares Bitcoin ETF (ARKB) lost about $240 million in October.
• The CoinShares Bitcoin ETF (BRRR) saw around $5 million in outflows.

It’s always important to have a plan before a selloff like this happens, as a panic is often the worst time to sell, Armour said. “Know the points at which you would sell to take gains and cut losses ahead of time, so emotions don’t dictate actions,” he said.