Bitcoin ETFs retain $55B after a 50% BTC drawdown – ‘Incredible intestinal fortitude’
Institutional players expected the $73K-$82K price range to extend to the end of Q3.
Bitcoin still commands strong institutional investor interest despite price tanking 50% during the multi-month crypto winter.
According to Bloomberg analyst Eric Balchunas, the lifetime or cumulative, spot U.S. BTC ETF flows were currently at $55B, down from its peak of $62.8B (11% drop).
Incredible intestinal fortitude from the Boomers, given they saw a 50% drawdown. The reason this is the most important chart is that it excludes price appreciation, so it’s a pure measure of investor interest.
The products debuted in early 2024; hence, the resilient cumulative flows two years later underscore long-term investor conviction.
However, prevalent macro and geopolitical factors have influenced the Spot BTC ETFs’ demand in the short and mid-term.
Will Bitcoin survive Fed, BoJ rate-hike cycle?
Notably, the explosive 30% BTC recovery in Q3 was triggered by U.S. intervention to address rising bond yields. This further deepened the fiscal debt crisis, forcing a renewed debasement trade as Bitcoin and gold prices exploded.
But the persistent U.S-Iran tensions and oil-driven inflation fears emboldened the Fed to begin interest rate hikes again. As the market expected, the Bank of Japan (BoJ) also increased its interest rate to 1.25%, making a 31-year high.
Initially, this dampened risk appetite and stalled the BTC rally below $80K. Alongside the CLARITY Act setback, the asset briefly slipped below $75K mid-week. Overall, over the past two weeks, spot BTC ETFs bled close to $1B amid geopolitically driven inflation fears.
However, as of writing, the asset was back to $78K, up over 4% from weekly lows of $74.9K. Notably, the Japanese Yen weakened after the BoJ hike, and crude oil prices also slipped by 1.6% to $100 from Tuesday’s $105 reading. This boosted the rebound.
Still, the Fed is expected to hike rates again with no cuts in 2027, further raising fears that it could derail BTC’s sustained recovery.
However, Grayscale’s Zach Pandl downplayed these rate hike fears, citing historical data (1997) and Nasdaq’s gains.
25 basis points hike and crypto is still green. Grayscale Research views this as a mid-cycle adjustment, not a cyclical shift, and expects little impact on crypto markets.
Source: Grayscale
For his part, Bitwise CIO Matt Hougan projects that Bitcoin will extend its rally provided U.S. fiscal debt keeps rising. In other words, the asset price appreciation will be driven by the debasement trade.
That said, institutional players were expecting a sideways structure to the end of Q3, with top calls (bullish bets) concentrated at $80K and $82K levels. Also, there were puts (hedging) against a price decline to $73K and $75K (red bars).
Final Summary
- U.S. Spot BTC ETFs cumulative flows were at $55B, down slightly 11% from a peak of $62B
- Grayscale downplayed the Fed rate hike cycle fears, noting that it’s an adjustment, not a ‘cycle shift’
