Bitcoin ETFs See $510 Million in Net Inflows, Signaling Potential Sentiment Shift

In brief

Bitcoin ETFs have generated $510 million in net inflows over the past three days.

Sentiment could be turning a corner, according to 21Shares' James Butterfill.

The products have bled roughly $8 billion over the course of eight weeks.

Wall Street’s favorite crypto vehicles have notched net inflows for three consecutive days, reversing a record slump as investors cautiously wade back into Bitcoin.

Exchange-traded funds tied to the digital asset have pulled in roughly $510 million since Friday, marking a shift in momentum from the “largest run of outflows we’ve ever seen,” James Butterfill, head of research at asset manager 21Shares, told Decrypt.

“It looks like sentiment might be turning a corner,” he said. “They are the largest inflows we’ve seen since the outflows began in early May, suggesting we’re maybe through the worst of it.”

Despite their overwhelming popularity in recent years, Bitcoin ETFs have shed $8 billion over the past eight weeks, with investors seeking shelter as the digital asset plunged to a 21-month low. Amid the record bleed, year-to-date outflows deepened to $2.8 billion.

On Wednesday, Bitcoin changed hands around $62,000, a 4% increase over the past week, according to CoinGecko. Earlier this month, the digital asset fell as low as $58,000, exacerbating Bitcoin’s tumble from $126,000 in October.

On a proportional basis, Butterfill said the latest streak of outflows represented 8% of assets under management for Bitcoin ETFs, mirroring activity during cycle lows in 2018. He described this year’s drawdown as similar to one last February that saw investors yank $5.2 billion.

For the most part, investors who have allocated to Bitcoin ETFs are underwater. Based on the average cost basis for allocations to the products, the average buyer gained exposure when Bitcoin was valued around $83,800, according to Glassnode.

So-called whales—who typically hold 1,000 Bitcoin or more—have sold more than $40 billion worth of Bitcoin since the digital asset’s price peaked last year, Butterfill said. He noted that the source of negative price pressure has abated as of late.

Although Bitcoin’s largest holders have shifted gears, Butterfill cautioned that expectations of tighter monetary policy in the U.S. could prevent Bitcoin from breaking out of its current range, as the Federal Reserve continues fighting inflation amid conflict in the Middle East.

“We’re not in a situation where we can say the Fed is on the cusp of cutting rates, and that would be very supportive to Bitcoin,” he added. “Bitcoin remains very, very sensitive to the inflation outlook, and by proxy, the Iran war and the outlook from the Fed.”