Bitcoins The massive drop since a record price of over $126,000 last October has dampened sentiment across the crypto landscape. Faith has been shaken in a trade seen as a digital competitor to gold as a store of value and by some others as a risky asset that would continue to boom alongside a crypto-friendly Trump administration.
Since hitting its all-time high last October, Bitcoin has lost almost half of its value and the inability to recover in trading is raising fears of another “crypto winter” – a sustained slump similar to the period of the FTX crash in 2022, when Bitcoin fell from nearly $50,000 to as low as $15,000. In the last month alone, Bitcoin has fallen by over 25%.
However, crypto investing experts say in the latest CNBC report “ETF Edge” that a look at recent inflows and outflows into Bitcoin and crypto exchange trading funds suggests that long-term investors are not giving up on the asset class. Certainly the money has been withdrawn, but they say not to a degree that suggests long-term investor panic.
In the last three months the iShares Bitcoin Trust (IBIT) recorded net outflows of approximately $2.8 billion. That’s significant, but last year the BlackRock ETF attracted nearly $21 billion in net inflows, according to VettaFi. The broader category of spot Bitcoin ETFs shows a similar pattern. Over the past three months, the ETF asset class has seen net outflows of around $5.8 billion. Last year, net inflows across all spot Bitcoin ETFs remained positive at $14.2 billion. The money is being withdrawn, but the bulk of the assets remain, and some ETF experts say the money being withdrawn does not come from the long-term investors or financial advisors who began allocating to the asset class.
“It’s not ETF investors driving the selloff,” Matt Hougan, CIO of Bitwise Asset Management, said on “ETF Edge.”
He says much of the overall pressure on Bitcoin could come from crypto investors who have built up positions over many years and are now reducing their exposure. “It’s really a story with two sides,” Hougan said. He also said there are hedge funds and short-term traders who use the most liquid ETFs as instruments and may quickly withdraw capital if momentum turns negative.
At CNBC’s Digital Finance Forum last week, Galaxy CEO Mike Novogratz said the “era of speculation” in the crypto market may be coming to an end and future returns will more closely resemble a long-term investment. “They will be real assets with much lower returns,” he said at the CNBC event in New York City last Tuesday. “Retail people don’t get into cryptocurrencies because they want to make 11% on an annual basis,” he said. “They get in because they want to do 30 to one, eight to one, 10 to one.”
Financial advisors at Wall Street banks are among those adding Bitcoin to investors’ portfolios and adding their own crypto ETFs. And investors with longer horizons who hold crypto as a small allocation in diversified portfolios may be prepared to ride out the volatility, Hougan said. If investors capitulated across the board, outflows in the last three months would likely approach the size of inflows over the last 12 months.
Not that ETF asset flow analysis would make this period easy for a new crypto investor to endure. “It’s hard to be a Bitcoin investor right now,” Will Rhind, founder and CEO of ETF firm GraniteShares, said on “ETF Edge.” He added that the performance of other “hard” assets, such as Goldhas added to the Bitcoin plight. For investors who have supported the concept of “digital gold,” the Bitcoin price crash was worrying. “This cannot be allowed to happen,” he said of a period in which other safe havens are performing strongly and Bitcoin continues to fall. If Bitcoin falls nearly 50%, “gold should not rise to all-time highs,” he said.
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Performance of the iShares Bitcoin Trust compared to the SPDR Gold Shares Trust over the past year.
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