Bitcoin’s steep drop from its peak of over $126,000 last October has cast a shadow over the cryptocurrency landscape. This decline has shaken confidence in Bitcoin, which many see as a digital alternative to gold and a rapidly evolving asset during a crypto-friendly administration.
Since its all-time high, Bitcoin has nearly halved in value and struggles to regain footing in the market, raising concerns about another prolonged downturn, similar to the FTX crisis last year that sent prices tumbling from almost $50,000 down to $15,000. It’s worth noting that just in the past month, Bitcoin’s value has dropped more than 25%.
Yet, experts in crypto investments, appearing on CNBC’s “ETF Edge,” point out that despite some money leaving the Bitcoin and crypto exchange funds, it doesn’t seem like long-term investors are bailing out entirely. Sure, there are some withdrawals, but they don’t indicate that panic is setting in among those committed for the long haul.
In recent months, the iShares Bitcoin Trust (IBIT) reported a net outflow of about $2.8 billion. While that figure seems significant, VettaFi highlighted that, over the past year, the BlackRock ETF alone has attracted nearly $21 billion in net inflows. The trend is consistent across the broader Bitcoin ETF category, which shows net outflows of around $5.8 billion over the last three months. However, the overall year adds up to a positive net inflow of $14.2 billion for all Spot Bitcoin ETFs. Although money’s been flowing out, a considerable amount still remains. Experts contend that the withdrawals are not primarily from long-term investors or financial advisors who have previously embraced this asset class.
Matt Hogan, chief investment officer at Bitwise Asset Management, remarked, “It’s not the ETF investors who are driving the selling.”
He suggested that much of the current pressure on Bitcoin prices might stem from investors who have been in the crypto space for years and are now scaling back their investments. “It’s really two different sides to this coin,” Hogan explained. He also mentioned that hedge funds and short-term traders often use liquid ETFs as tools; they can quickly pull their investments if the market’s direction turns unfavorable.
At a recent CNBC Digital Finance Forum, Galaxy CEO Mike Novogratz stated that the “age of speculation” in the crypto market might be over. He hinted that future returns could resemble those of traditional long-term investments rather than the wild swings seen in the past. “People aren’t jumping into cryptocurrencies hoping for 11% returns,” he noted. “They’re in it for much bigger wins like 30-1, 8-1, or 10-1.”
Some advisors on Wall Street are now adding Bitcoin or private-label crypto ETFs to investors’ portfolios. Long-term holders, who see cryptocurrencies as a small part of a diversified approach, might be inclined to ride out the current tumult, according to Hogan. If widespread investor capitulation were to happen, the outflows observed in the last three months could close in on the inflows accumulated over the past year.
Navigating ETF asset flows is undoubtedly challenging for crypto investors at this moment. “It’s tough to be a Bitcoin investor right now,” said Will Lind, founder and CEO of GraniteShares, during “ETF Edge.” He further mentioned that the fate of other “hard” assets, like gold, also plays a critical role in Bitcoin’s struggles. The ongoing drop in Bitcoin prices raises alarm bells for those who have supported the notion of it being “digital gold.” “This shouldn’t be happening,” he stated, especially when other safe-haven assets are thriving while Bitcoin continues to decline. “It’s hard for gold to hit all-time highs,” he added, “when Bitcoin’s down nearly 50%.”
