The recent decline in Bitcoin‘s price has been accompanied by notable net outflows from the 12 U.S. spot exchange-traded funds (ETFs), totaling approximately $1.2 billion between August 27 and September 6. While this might seem alarming at first glance, experts suggest it could signal a healthy stage of growth for the ETF market.
Eric Balchunas, a senior ETF analyst at Bloomberg, described the situation as part of the natural maturation process for ETFs. “This is going to be two steps forward, one step back,” he said. “That’s the way many ETF categories are born and mature.” Balchunas emphasized that ETF flows rarely increase in a straight line due to their service to both long-term investors and traders.
The $1.2 billion outflow represents about 3% of the total assets in the funds, which stood at $46 billion following the outflows, according to Bianco Research. Balchunas indicated that a more concerning figure would be around 15%-20% of assets.
Despite the recent outflows, ETF issuers have generally benefited from substantial cash inflows. In the first two months of trading, the ETFs attracted $12 billion, although the pace of new investments has slowed. Bianco Research reports that inflows have dwindled to $4 billion over the next six months, with only $1 billion in the past three months.
Balchunas highlighted that the key to a successful ETF category is not just attracting money during positive periods but also managing to limit outflows during downturns. He praised the Bitcoin ETFs for effectively handling recent large price sell-offs, such as those associated with Mt. Gox and the German government, where the funds quickly rebounded to inflows despite modest exits.
“The ETFs have really done a good job keeping Bitcoin out of the abyss,” Balchunas noted. “They have saved Bitcoin’s butt a couple of times in the past couple of months from real, real depths.”
Related Topics:
