Bitcoin ETFs Shed $563 Million as BlackRock's IBIT Marks First Daily Loss

Spot Bitcoin ETFs in the United States marked their worst day on record Wednesday, notching more than half a billion dollars in net outflows for the first time since their January debut.

As Bitcoin’s price fell to its lowest point in two months Wednesday, spot Bitcoin ETFs saw $563 million in net outflows, according to data from CoinGlass—far exceeding a previous record of $326 million in daily net outflows seen in mid-March.

The outsized bleed from Bitcoin funds came as the Federal Reserve affirmed that its fight against inflation is likely far from over. The U.S. central bank kept interest rates fixed at their highest levels in over 23 years following its May policy meeting.

At the same time, Fed Chair Jerome Powell said tighter monetary policy that could weigh on risk assets like stocks and crypto was “unlikely” to be next. Following his remarks, Bitcoin climbed to $58,500, yet it remains down 8% over the past week.

As the selloff materialized Wednesday, BlackRock’s spot Bitcoin ETF saw outflows for the first time. Amassing $15.4 billion uninterrupted since its Wall Street launch, the iShare Bitcoin Trust (IBIT) saw outflows of $37 million, according to Farside Investors.

At the same time, Grayscale’s Bitcoin Trust (GBTC), which has seen over $17 billion in cumulative outflows since January, didn’t hemorrhage the most cash Wednesday. Instead, holders of Fidelity’s spot Bitcoin ETF led the selloff, which saw $191 million leave the fund as GBTC witnessed outflows of $167 million.

Outflows from GBTC—which was converted to a spot ETF in January after a decade on the market—have been tied to the bankruptcy estates of several crypto firms parting with shares. Grayscale’s management fee of 1.5% for GBTC also stands out as other products charge investors around 0.25%—offering cheaper alternatives.

Spot Bitcoin ETFs have the potential to “amplify market downturns,” analysts from crypto analytics firm Kaiko wrote in a report released alongside Moody’s Wednesday. “If there is an event that triggers large outflows, ETF issuers will need to liquidate their holdings, which could weaken values in crypto markets,” it stated.

In mid-March, spot Bitcoin ETFs had $63 billion in assets under management (AUM). But amid Bitcoin’s recent slide, the market value of their Bitcoin holdings (plus a tiny amount of cash) has fallen 19% to $51.4 billion

With net outflows on Wednesday representing 1% of spot Bitcoin ETFs’ AUM, the outflows appeared “totally normal for [a] risk asset ETF during [a] selloff,” Bloomberg Senior ETF Analyst Eric Balchunas said on Twitter. If Bitcoin’s “correction worsens,” however, he said the ETFs’ AUM could drop 10%—and he “wouldn’t be surprised.”

Though spot Bitcoin ETFs saw more than half a billion dollars in net outflows Wednesday, the price of Bitcoin is still up 33% year-to-date, partially due to the supply and demand dynamics ushered in by the products.

“The flywheel works both to the upside and downside,” pseudonymous crypto trader WhalePanda said on Twitter of spot Bitcoin ETFs, adding the outflows aren’t “a surprise since panic is everywhere.”

Edited by Andrew Hayward