US spot Bitcoin ETFs see $5.3 billion in inflows since US Treasury announcement on August 19

Five billion, only one asset. The Bitcoin and Ethereum ETFs made headlines last week with several billion dollars in net inflows, not seen since October, but that total mixed the two assets. ETF analyst Nate Geraci singles out bitcoin alone. US spot Bitcoin ETFs have captured $5.3 billion since the Treasury announced expanded debt buybacks on August 19.

Treasury buybacks: what changed on August 19

On August 19, the US Treasury doubled the ceiling on its so-called liquidity support repurchases for maturities of 10-20 years and 20-30 years. From September 9 to November 4, each operation goes from a maximum of $2 billion to at least $4 billion according to the official Treasury press release. The market reacted during the day. The 30-year yield fell from 5.34% to 5.19% and bitcoin gained 8.2% in less than twelve hours, from $64,100 to $69,500.

The mechanism has nothing to do with quantitative easing. The Treasury buys back long securities already issued and finances the operation by issuing more short debt, without creating bank reserves as the Fed would do. The stock of debt does not change, only its composition changes. Rebecca Patterson, researcher at the Council on Foreign Relations, sees it as “more of a signal than substance” given the size of the Treasuries market. This signal was still enough to liquidate around $1.4 billion in short positions on bitcoin on August 19 alone.

“Spot Bitcoin ETFs have now raised $5.3 billion since the US Treasury announced plans to increase its long-term bond purchases…”

Bitcoin ETF: a week at $2.4 billion

The August movement has not run out of steam. In the week ending September 25 alone, US spot Bitcoin ETFs collected $2.4 billion. Monday September 21 alone weighed 999 million, the ninth highest day of inflows since the launch of the funds in January 2024. The pace then slowed down each day, up to 134.5 million on Friday. BlackRock's IBIT captured nearly 1.2 billion over the week and Fidelity's FBTC 701.7 million.

The annual report has turned around. Still $5.7 billion in the red for the year as of July, Bitcoin ETFs now show 934 million net inflows since January 1. Their assets under management reach $108.4 billion.

A correlation which now clashes with the rise in rates

The parallel between redemptions and flows has a limit, and it lies in the calendar. The US 10-year rate closed on Friday at 5.17%, its highest level since 2007. In mid-August, repurchases brought down long-term rates which had just come out of their highest levels in twenty years. The markets have been betting since mid-September on a further hike in Fed rates, and this bet weighs more than 4 billion repurchases per operation. Bitcoin fell back to around $84,000 on Friday, after peaking at $87,363 at the start of the week.

Beyond November 4, the size of the redemptions will depend on the next quarterly refinancing of the Treasury, announced the same day. A return to the cap of $2 billion per trade would remove from Bitcoin ETFs the argument that launched the August wave.