‘Huge outflows’ from the largest Bitcoin ETF may have triggered a BTC crash
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The world’s largest bitcoin (BTC) spot exchange traded fund lost half of its assets under management last Friday, which may have exacerbated the bitcoin crash on Saturday.
The Purpose Bitcoin ETF saw an outflow of 24,510 bitcoins on Friday, the most serious redemption in a single day since the fund debuted on the Canadian stock exchange in April 2021, according to Norway-based Arcane Research.
The outflows mean that the fund had to sell around 500 million dollars in BTC at Friday’s price, which increases the selling pressure in an already shaky crypto market, Arcane wrote in a report.
“The huge outflows are probably caused by a forced seller in a huge liquidation,” wrote Arcane analyst Vetle Lunde. “The forced sale of 24,000 BTC could have triggered BTC’s move down to $ 17,600 this weekend.”
Bitcoin (BTC) fell below $ 20,000 on Saturday, falling to as low as $ 17,678. Traders were shaken by fears of insolvency in the crypto industry, when cryptocurrency lender Celsius Network stopped customer withdrawals, BlockFi sought further funding and the crypto hedge fund Three Arrows Capital confirmed that it suffered heavy losses.
This weekend’s price action also marked the first time the largest cryptocurrency had fallen below the previous cycle’s all-time high, quoted in December 2017, at $ 19,783.
ProShares Futures ETF takes over as the largest
Bitcoin ETFs track the value of bitcoin and provide a way to invest in the largest cryptocurrency without having to deal directly with crypto; they can be bought, sold and traded on traditional exchanges instead of on cryptocurrency trading platforms. ETFs actively add and sell bitcoin to match investors who invest in and redeem from the fund.
Purpose Bitcoin ETF was by far the largest bitcoin-focused exchange-traded product, managing nearly 48,000 bitcoins before Friday’s redemptions. The fund now has only around 23,300 BTC.
Another bitcoin-focused fund, the 3iQ CoinShares Bitcoin ETF, suffered large outflows last month, selling 7,401 BTC of its holdings.
As a result of last week’s outflow, the Purpose Bitcoin ETF lost its top spot to the New York Stock Exchange-listed ProShares Bitcoin Strategy (BITO) ETF, which has bitcoin futures instead of spot bitcoin.
BITO saw its second largest net income last week since its launch in October last year, which led to the fund’s bitcoin exposure increasing by the equivalent of 4,115 BTC. Data show that the fund manages $ 668 million in assets, which is equivalent to around 31,500 BTC.
The contrast suggests that “at least some US investors view the current sale of BTC as an attractive entry point, and take advantage of forced sellers,” for a short-term relief rally, Lunde wrote in the Arcane Research report.
In total, crypto funds that manage bitcoin raised $ 28 million in inflows last week, and apparently take advantage of the weak prices, the crypto fund provider CoinShares reported on Monday.
“Investor opinion is extremely polarized, and some see this as a great buying opportunity, while others are intimidating, liquidating positions,” James Butterfill, head of research at CoinShares, told CoinDesk in an email. “Fund flows are likely to remain mixed.”
