Bitcoin ETFs draw $510 million after eight-week outflow streak

Bitcoin exchange-traded funds have started taking in fresh money again after a bruising stretch of withdrawals. For everyday investors, the turn matters because ETFs are one of the main ways Wall Street buyers get Bitcoin exposure through regular brokerage accounts.

The funds recorded about $510 million in net inflows over the past three days, according to Decrypt, citing James Butterfill, head of research at CoinShares. Net inflows mean more money entered the products than left them over that period.

Butterfill told Decrypt that sentiment may be improving after what he described as the biggest outflow run the products have seen. He said the latest inflows were the strongest since withdrawals began in early May, suggesting the worst of the selling pressure may have passed.

What changed for Bitcoin ETFs

A Bitcoin ETF, or exchange-traded fund, is a fund linked to Bitcoin that trades on a stock exchange. Investors can buy and sell shares of the ETF instead of holding the token directly. When ETF investors pull cash out, fund issuers generally have to reduce exposure, which can add pressure to the market. When money flows in, that pressure can ease.

The recent positive streak follows a sharp reversal. Bitcoin ETFs lost about $8 billion over eight weeks as investors moved away from the products while Bitcoin fell to a 21-month low, according to Decrypt. Those withdrawals pushed year-to-date outflows to $2.8 billion.

Bitcoin was trading near $62,000 on Wednesday, up 4% over the previous week, according to CoinGecko data cited by Decrypt. Earlier in the month, Bitcoin dropped as low as $58,000, extending a decline from $126,000 in October.

Most ETF buyers are still underwater

The flow improvement does not mean ETF investors are back in profit. Based on the average cost basis for allocations to the products, the typical Bitcoin ETF buyer entered when Bitcoin was around $83,800, according to Glassnode data cited by Decrypt. Cost basis means the average price paid for an investment.

Butterfill also said the latest outflow stretch equaled about 8% of Bitcoin ETF assets under management. Assets under management, or AUM, refers to the total value held in a fund or group of funds. He compared that level of selling to activity seen around Bitcoin cycle lows in 2018 and said this year’s decline resembled a February episode when investors withdrew $5.2 billion.

Large Bitcoin holders have also played a role in the selloff, according to Butterfill. He said so-called whales, typically wallets or investors holding at least 1,000 Bitcoin, have sold more than $40 billion worth of Bitcoin since the token’s price peaked last year. He added that this negative price pressure has eased recently.

The rebound in ETF flows gives investors a cleaner read on demand after weeks of selling. It does not settle where Bitcoin goes next, but it shows that one major channel for traditional-market crypto exposure has, at least for now, stopped bleeding cash.

This story draws on original reporting from Decrypt.