Jun 16, 2024

Bitcoin ETF Flows: Adoption Incoming

Bitcoin ETF flows indicate surging institutional interest. Discover how this impacts BTC adoption and price.

Bitcoin ETF Flows: Adoption Incoming

Bitcoin continues its march forward into the mainstream financial landscape. It is increasingly viewed by Wall Street not just as a speculative tool but as a viable asset class. Exchange-traded funds (ETFs) are convenient financial instruments for traditional investors, while the arrival of the spot Bitcoin ETFs means that there is now a way for investors to integrate Bitcoin into conventional portfolios.

What is a Bitcoin ETF?

A Bitcoin ETF allows individuals and institutions to invest in Bitcoin without the complexities of securing the digital asset for themselves. The ETFs attempt to track the price of bitcoin and mirror its performance, and investors can buy shares of the ETF from most traditional brokerage firms, where they also purchase their stocks, bonds, and other commonly traded assets. 

Bitcoin ETFs provide a way to buy and sell through well-regulated avenues with a successful track record. These funds give retail and institutional investors a sense of assurance that is attractive to many. In addition, some investors have seen that holding bitcoin on an exchange can be dangerous. They know holding bitcoin on an exchange can be hazardous after hearing about debacles like Mt. Gox or FTX, but they find the responsibility of bitcoin self-custody intimidating. They know that the ETFs will not give them access to the security and sovereignty that holding bitcoin provides. However, they are willing to relinquish those benefits if they can still receive the benefits of Bitcoin’s price appreciation.

Bitcoin ETF Inflows and Outflows

In the first four months of trading, the investors have acquired approximately 210,000 in Bitcoin via the ETF’s. The majority of this comes is investors leave Grayscale’s ETF (GBTC) due to the higher than market fee structure (1.5% compared to others such as BTCO, who have even waived fees entirely for assets up to $5B for the first six months of trading).

Source: Apollo Bitcoin Tracker

Following the Bitcoin Halving event on April 19, the daily issuance of new bitcoin fell from 900 per day to 450. This reduction in supply growth has quickened the pace of an inevitable shortage.

Institutional Adoption on the Rise

While those still dubious about Bitcoin’s staying power might suggest that the ETFs were “just another fad” (and short-lived at that), recent news has shown that large institutions and government organizations have been accumulating. According to a post on X from Eric Balchunas, Senior ETF Analyst at Bloomberg, Bracebridge Capital has reported holding $363 million of the ETFs diversified among three different funds. On top of this, a recent SEC filing shows that the State of Wisconsin Investment Board has purchased just under $100 million of BlackRock’s Bitcoin ETF.

Despite the short-term range pattern, these moves indicate a trend of long-term positive flows for the Bitcoin ETFs. Institutional investors are beginning to increase their exposure to Bitcoin.

Impact on Bitcoin's Price

Bitcoin’s price is famously difficult to predict. However, remember that only 450 new bitcoin are issued every day. Even at the (currently) aspirational price of $70,000, that is less than $32 million per day. With this in mind, the two institutions cited above - Bracebridge Capital and the State of Wisconsin Investment Board - purchased nearly fifteen days’ worth of the current issuance. Many others are already buying, and if the recent trend continues, many more will come.

Of course, adoption among institutions will take time. But the beginning stages are already clearly visible. This does not even take into account those institutions or individuals who prefer to buy actual bitcoin rather than the ETFs. When the constant bid of the ETFs is paired with buying pressure that has already existed across the last fifteen years, there’s one predictable direction for Bitcoin’s price over the long term: HIGHER.

Conclusion

In summary, Bitcoin ETFs have helped the asset to gain more mainstream acceptance. Their growth has been staggering, and institutions are accumulating. With only 450 new bitcoin available daily, the ETFs can absorb much more than the daily supply of new bitcoin. 

Add to this the pressure for institutions to consider Bitcoin for their portfolios and the inevitable FOMO from individuals, and this is a recipe for an exciting acceleration of Bitcoin adoption.

About the author.