Institutional inflows for Spot Bitcoin ETFs broke a new record as $556.71 million was added on October 14, the largest volume to be realized in one day in more than four months. In the same vein, Bitcoin (BTC) has also hit a $68,995 price level for the first time in more than three months. Speaking with sources, Nate Geraci, president of ETF Store shared his sentiment about this unprecedented happenings. He stated, “Simply ridiculous & blows away every pre-launch demand estimate. This is NOT ‘degen retail’ $$$ IMO. It’s advisors & institutional investors continuing to slowly adopt.”
Causes of the Explosive Spot Bitcoin ETF Inflows
These phenomenal inflows carry several important implications for the current Bitcoin ETF market that is breaking all-records. One of the more significant forces is potentially around U.S. election headlines still to come. Amidst this growing positivity, Chris Aruliah, Head Of Institution at Bybit, notes that “As we edge closer to the US election in November, investors may be more confident in placing their bets that we’ll see the resumption of BTC’s bull trend.”
Along with the political backdrop, brighter macroeconomic circumstances have added to the sentiments. Recent economic data in the United States has given investors fewer concerns about a recession, said Alicia Kao, managing director at crypto exchange platform KuCoin. In addition, the continued decrease in interest rates by The Federal Reserve has favoured investments based on digital assets.
Improvement in regulatory clarity and global spot Bitcoin ETFs going live are supporting the rise in hedge funds participating in digital assets. Kao shared that “47% of traditional hedge funds now have exposure to digital assets, compared to 37% in 2022. This number is expected to grow as institutional confidence continues to rise.”
The Big Guns Take Over
Despite significant retail interest, institutional investors have driven the latest wave of inflows into Bitcoin ETFs. Velar CEO, Mithil Thakore noted that it is the institutional demand for Bitcoin which is leading this wave, pointing out Bitcoin inflows via ETFs are nearing $20 billion —a feat gold took over four years to achieve.
Caselin of VALR made similar comments to Thakore regarding the perception around Bitcoin as a safe asset in low and high interest rate environments, alike. Caselin further stated that, “Institutional participation is crucial for Bitcoin to achieve new price highs and potentially surpass gold as a prominent asset class”.
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Institutional firms held 21.15% of Assets Under Management (AUM) in Bitcoin ETFs as at June 30, a slight increase when compared to Q1 as noted by Alicia Kao. The increase reflects evidence that professional investors are starting to regard Bitcoin as a legitimate asset class but one still dominated by retail players.
Bitcoin ETFs Beat Traditional Assets
Spot Bitcoin ETFs have had a much better time compared to traditional asset classes such as gold. Although this year, the net inflow of gold ETFs is limited to $1.4 billion, Bitcoin’s ETFs have attracted more than $20 billion, and these numbers show what investors are concentrating on.
According to Bloomberg senior ETF analyst Eric Balchunas, as gold hit all-time highs 30 times in the year, its market outperformance continues to underwhelm that of Bitcoin. Chief Marketing Officer at exSat Network, Tristan Dickinson, emphasized that Bitcoin is naturally different to other assets due in part to its volatility and the possibility of quick gains as the main driving factors behind their ETF’s success. Dickinson said, “Bitcoin ETFs have already become the most successful ETFs in U.S. history, outpacing even traditional ETFs like those tied to gold”.
Further sweetening the deal for institutional investors is Bitcoin’s established “new” status as an asset class in its own right and similar mechanics to gold, Aruliah continued. But critically, Bitcoin is just more technologically advanced and lands on a better spot when it comes to fit in digital financial era areas — hence being able to absorb this capital much faster than traditional assets.
Where Will Spot Bitcoin ETFs Go From Here?
With increasing institutional buy-in, Spot Bitcoin ETFs will likely fight to remain the top dogs in digital assets. The upcoming U.S. election, along with an improving macro outlook, may set the stage for Bitcoin to see further price action in a similar vein. Although there are still obstacles on the road full of regulatory uncertainty, the flows, whether driven by speculation or macro asset allocation, show that some institutional investors now view digital assets as a valuable store of wealth alongside traditional commodities such as gold.
Should this trend persist, Bitcoin’s dominance in the ETF market may be an indication of a protracted sea-change in investor sentiment towards digital assets more broadly as Bitcoin spot ETFS outcompete some of the most entrenched asset classes.
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