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(Kitco News) - The filing of a spot Bitcoin exchange-traded fund (ETF) by BlackRock, the world’s largest asset manager, may be looked back on as the turning point for the cryptocurrency market as the asset class has seen a flurry of activity since the filing was first revealed on June 15.
According to the most recent Digital Asset Funds Flows report from European asset management firm CoinShares, digital asset investment products experienced their most significant inflows since July last week, recovering much of what had been lost over the previous two months.
“Digital asset investment products saw the largest single weekly inflows since July 2022, totaling US$199m, correcting almost half of the prior 9 consecutive weeks of outflows,” James Butterfill, head of research at Coinshares wrote.
Weekly crypto asset flows (US$m). Source: CoinShares
Bitcoin investment products were the biggest beneficiaries, with more than $187 million in inflows occurring last week, representing 94% of the total flows. Short-Bitcoin products saw outflows for the ninth consecutive week totaling $4.9 million, “with all 9 week’s outflows representing 60% of total AuM,” Butterfill said.
Exchange-traded products (ETP) also saw a spike in activity, with CoinShares reporting that these vehicles experienced a total trading volume of $2.5 billion during the week, a figure that is 170% of the average for this year.
“We believe this renewed positive sentiment is due to recent announcements from high profile ETP issuers that have filed for physically backed ETFs with the US Securities & Exchange Commission,” Butterfill wrote. “Total assets under management (AuM) are now at US$37bn, their highest since before the collapse of 3 Arrows Capital.”
Ethereum (ETH) saw the second highest level of inflows with $7.8 million flowing into these products, which represents merely 0.1% of AuM relative to Bitcoin’s inflows at 0.7%, “suggesting [the] appetite for Ethereum is lower than Bitcoin at present.”
While the uptick in activity has benefited Bitcoin, altcoins saw little benefit overall as investors have opted to focus on the two tokens that are known to be considered commodities by the Securities and Exchange Commission (SEC) – BTC and ETH.
“This turn in sentiment didn’t trickle down to altcoins with only very minor inflows into XRP and Solana totaling US$0.24m and US$0.17m respectively,” Butterfill said. “But the improved sentiment did encourage some investors to buy multi-asset investment ETPs, with US$8m inflows last week.”
BITO sees a spike in inflows
One of the biggest beneficiaries in the renewed interest in Bitcoin investment products was the ProShares Bitcoin Strategy ETF (BITO), a Bitcoin futures fund, which saw $65.3 million worth of inflows last week, pushing its total assets under management above $1 billion.
“The Bitcoin Futures ETF $BITO had its biggest weekly inflow in a year as assets top $1b again,” tweeted Bloomberg senior ETF analyst Eric Balchunas. “It also traded half a billion in shares on Friday, which it's only done about 5 times before.”
BITO fund flows. Source: Twitter
BITO was notably the first futures Bitcoin ETF in the U.S. and remains one of the most popular crypto investment vehicles among institutional investors. According to Balchunas, “Even though [BITO] got trashed by some bc futures roll costs, it pretty much has tracked Bitcoin perfectly. It lagged spot by 1.05% [annualy], but its fee is 0.95% = only 10bps of roll (extra) costs, which is [a] rounding error. Many predicted >5% a yr.”
Data from ProShares shows that the BITO fund has gained 59.6% since the start of 2023, but is down 42.76% since it was first launched on October 19, 2021, when BTC traded near $65,000.
Another beneficiary of the renewed interest in Bitcoin and other crypto-related institutional products is Grayscale Investments, which has seen the discount for its Grayscale Bitcoin Trust (GBTC) product decrease in recent weeks after hitting a record high near -49% in late 2022.
GBTC premium. Source: CoinGlass
At the time of writing, the GBTC premium is at -31.32%. Part of the reason for the recovery in the GBTC premium is due to optimism around Grayscale’s plans to convert the fund into an ETF, which is the subject of an ongoing lawsuit with the Securities and Exchange Commission (SEC).
The current structure of GBTC doesn’t allow investors to conduct redemptions, which is the main reason for the record discount. If the firm is able to successfully convert the product into an ETF, redemptions would then be enabled. This possibility has sparked a renewed interest in the product, which many consider to be on sale due to the discount.
