Early on Friday, spot bitcoin ETFs saw sharp declines as the value of the underlying asset dropped to depths not seen since February.
Based on data from etf.com, the BlackRock Bitcoin Trust (IBIT), the biggest fund in the category with over $19 billion in assets, was down almost 6.5% recently. The Grayscale Bitcoin Trust (GBTC), with $17.5 billion in AUM, and the Fidelity Wise Origin Bitcoin Fund (FBTC), with $10.6 billion in AUM, which are the second and third largest spot bitcoin ETFs, had a similar decline.
Spot Bitcoin ETF Flows Follow BTC Price
According to analysis from U.K.-based asset management Farside Investors, GBTC saw withdrawals of more than $34 million in the two trading days before the July 4 U.S. holiday. In contrast, net flows to IBIT and FBTC, as well as the other eight spot bitcoin ETFs that began trading earlier this year, have been modest.
According to statistics from cryptocurrency markets provider CoinMarketCap, Bitcoin dropped to roughly $53,600 on July 4. This is the first time since February 25 that the largest cryptocurrency by market value has dropped below $54,000. Although it has reclaimed some ground and is now trading at about $56,750, the asset is down 23% from its peak of almost $73,000 in March.
In a report dated July 4, crypto research organization 10X stated, “Bitcoin is breaking significant technical and psychological levels at $60,000.” For buyers of Bitcoin Spot ETFs and Bitcoin miners, this is a crucial level that serves as a general indicator of the three-month trading range’s bottom (support). As support is lost and sellers rush to find liquidity, price falls may quicken.”
The most recent drop coincides with ongoing liquidations by miners and other significant bitcoin holders, such as the United States and Germany, which recently gave exchanges more than $700 million worth of seized bitcoin. Spot bitcoin ETFs oversee assets valued at roughly $50 billion, with the entire amount varying based on the price of bitcoin.
Mark Connors, managing director and head of global macro strategy at Dallas-based Onramp, a provider of cryptocurrency services, questioned how investors would respond to the months-long decline in the price of bitcoin in a note to etf.com.
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BTC Price Tailwinds Remain
“While the spot ETF flows have slowed and reversed a bit, this new class [of investors] has held tight for the most part,” wrote Connors. However, the majority of the more than $15 billion in spot BTC ETF inflows happened at about the $40K to $60K BTC (levels), so if BTC breaks $50K, the resolve of the ‘class of 2024’ may be put to the test.”
However, Connors stated that his company’s year-end price prediction of $110,000 for bitcoin is still supported by encouraging remarks made by Donald Trump, the front-runner for the Republican presidential nomination, and a strengthening regulatory environment for cryptocurrencies.