Insights from the Second Trading Week of the Weekly Spot Bitcoin ETF Report

The Spot Bitcoin Exchange-Traded Fund (ETF) has concluded another week on US stock exchanges, continuing to generate positive sentiment among Bitcoin holders. Although the ETF’s introduction initially sparked bullish market sentiment, it did not push Bitcoin’s value beyond its resistance levels. Instead, it prompted a “sell the news” reaction, leading to a dip in BTC prices this week. Additionally, there has been a decline in investor interest in the ETFs, as reflected in the on-chain data.

The inflow of spot Bitcoin ETFs has reached a new low this week, as interest declines with Bitcoin trading near the $38K mark. On Wednesday, the daily inflow of investments hit its lowest level since the ETFs were launched on January 11.

According to on-chain data, the recent set of nine ETFs attracted around $245 million in inflows on January 24. However, when accounting for the outflows from Grayscale Investment’s spot Bitcoin ETF, there was a net withdrawal of approximately $403 million on the same day. This marks the third consecutive day of net outflows. It is important to note that these outflows were solely from the Grayscale Bitcoin Trust (GBTC), which transitioned from a trust to an ETF after receiving approval from the US Securities and Exchange Commission.

Furthermore, the Netflow metric reached its lowest value on January 24th, at -$158 million. This represents a significant decrease from the previous week’s high of $477 million.

The recent data indicates a substantial drop in Netflow and a record low in single-day investor gross inflows for spot Bitcoin ETFs, signaling a noticeable decline in investor interest over the past week.

The decreasing interest in Bitcoin ETFs could impact Bitcoin’s price in several ways. Firstly, ETFs often provide insight into investor sentiment towards BTC. With less money flowing into Bitcoin ETFs, it suggests that investors are becoming less enthusiastic about Bitcoin. This diminished enthusiasm can contribute to a negative market sentiment, potentially causing a decline in Bitcoin’s price.

Additionally, when money is withdrawn from these ETFs instead of being invested, it suggests that investors may be reallocating their funds to other assets, possibly in search of safer options or due to concerns about market conditions. When people withdraw their money from Bitcoin ETFs, the demand for Bitcoin decreases, which usually results in lower prices.

The main reason behind the decline in interest is FTX’s $1 billion sale of GBTC. The bankrupt cryptocurrency company sold its entire stake in the Grayscale Bitcoin Trust, consisting of 22 million shares valued at $900 million. This contributed to Bitcoin testing the $38,500 level last week.

However, other ETF providers are continuing to accumulate more Bitcoin despite the outflow from GBTC. The volume of Bitcoin purchased by these ETFs (102K BTC) represents over half of the total Bitcoin holdings accumulated by major investor MicroStrategy over the past three years. As of December 26, 2023, MicroStrategy held a total of 189,150 BTC, according to their latest Bitcoin acquisition report.

It is worth noting that GBTC’s market share has dropped from its peak of 64% to just 39% last week, while other ETF providers have not experienced this decline. BlackRock’s market share has surged to 29% from 18.7%, preventing a shift in market sentiment despite the continuous decline in volumes for spot Bitcoin ETFs.