Posted on

Outflows Rock Bitcoin As Institutional Investors Pull The Plug, More Downside Coming?

Outflows have been the order of the day since the price of cryptocurrencies such as Bitcoin had begun to crash. The same sentiment had spread through individual as well as institutional investors, leading to massive sell-offs in the space. Despite the price of bitcoin recovering in recent times, it seems that the sellers are not done just yet as outflows had ramped up over the last week.

$453 Million Leaves Bitcoin

Bitcoin had been seeing a reversal trend with inflows coming in for the prior week. However, this has only been short-lived as outflows have continued to rock the digital asset. For the last week, CoinShares reports that bitcoin had led the outflow trend and the net outflows had come out to $453 million for the digital asset. It is one of the largest outflows ever recorded for the digital asset and has wiped out the majority of inflows on a year-to-date basis.

Related Reading | Bitcoin May Not Reclaim All-Time High For Another Two Years, Binance CEO

This comes as bitcoin’s price had continued to fluctuate around $20,000 over the last week. It was expected that the low prices would trigger more inflows into the market for the past week but the opposite has been the case. The total assets under management (AuM) for bitcoin now sits at $24.5 billion, the lowest it has been in more than a year. 

BTC recovres above $21,000 | Source: BTCUSD on TradingView.com

Its short-bitcoin counterpart had gone a different path this week where inflows had been the order of the day. The $15 million that flowed into it is said to be a result of the first US-based short investment product which launched last week. Given that the older short-bitcoin investment products had recorded outflows for the same time frame, all fingers point towards the launch.

Ethereum also saw inflows, a first in three months. It came out to a total of $11 million flowing into the altcoin after suffering 11 weeks of outflows.

North American Outflows Grow Worse

The outflows have been localized to one specific region and that is the North American corner of the market. CoinShares notes that the majority of the outflows had come from Canadian exchanges. Specifically, one provider. Most of the outflows had been seen on 17th June but did not show up until last week. It shows that these sell-offs had been a trigger for bitcoin’s decline to $17,700.

Related Reading | Crypto Liquidations Settle As Bitcoin Recovers Above $21,000

Digital asset investment product outflows were just as large with $423 million flowing out of the market, a new record for the space. However, given the lag that led to the trades from the Canadian exchanges updating late, it is important to know that these outflows were not from last week alone. When these outflows are removed and marked to their correct time frames, it shows that inflows of $70 million had been recorded by other providers.

The last time record outflows were seen was at the start of the year when $198 million had left the market in a single week in January. The outflows recorded for last week have surpassed this by more than 100%, although the ratio to the assets under management remains low compared to the bear market outflows of 2018 where outflows had reached as high as 1.6% of total AuM. 

Featured image from MARCA, chart from TradingView.com

Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet…

Posted on

Bitcoin Futures ETF Exceeds Expectations, Trades $1 Billion On Day One

The numbers are in, and the Bitcoin Futures ETF had the biggest debut of the year. By far. We have to “exclude ETFs where their Day One volume was literally one pre-planned giant investor or BYOA,” but that’s fair. Apparently, the ProShares Bitcoin Strategy ETF got to the top naturally, via real trades by real people and institutions. Considering that just its approval by the SEC seemed to catapult Bitcoin’s price to the edge of an All-Time High, a question arises. How will the market react tomorrow? And the day after that?

Related Reading | Bitcoin ETF Check, What’s Next For BTC

But let’s avoid speculation and check Senior ETF Analyst for Bloomberg, Eric Balchunas’ charts:

If we don't exclude ETFs where their Day One volume was literally one pre-planned giant investor or BYOA (not natural), it still ranks #2 overall. Here's that list. The reason some of these shouldn't be included IMO is they don't really represent grassroots interest. pic.twitter.com/wmZiHnpFrS

— Eric Balchunas (@EricBalchunas) October 19, 2021

Considering the first-ever Bitcoin Futures ETF “also traded more than 99.5% of all ETFs,” it’s fair to say the launch was a huge success. What does it mean for the following ETFs? According to Balchunas, it’ll be hard for them to succeed. “Every day counts because once an ETF gets knows as ‘the one’ and has tons of liquidity, it’s virtually imposs to steal.” And, what does this mean for the market in general? NewsBTC already covered this question:

“Although these ETFs have attracted criticism for being backed by futures contracts and not the underlying asset, they could still have big implications for Bitcoin — allowing tax-sheltered and retirement accounts to easily get exposure, and potentially opening the cryptoasset to a much broader audience.”

The NYSE welcomes @ProSharesETF in celebration of the first U.S. Bitcoin-Linked ETF $BITO https://t.co/0qh0NDS2d4

— NYSE 🏛 (@NYSE) October 19, 2021

Why Is There A Bitcoin Futures ETF Instead Of A Bitcoin ETF?

Who better to answer this question than the SEC’s chairman himself, Gary Gensler told CNBC: 

“What you have here is a product that’s been overseen for four years by the U.S. federal regulator CFTC, and that’s being wrapped inside of something within our jurisdiction called the Investment Company Act of 1940, so we have some ability to bring it inside of investor protection.” 

So, the Bitcoin Futures ETF falls under the Commodity Futures Trading Commission jurisdiction. Plus, it tracks the Chicago Mercantile Exchange (CME) Bitcoin futures. And the SEC considers that the institutional support will protect the customer. According to them, the underlying asset, Bitcoin, is too volatile and subject to manipulation.

The first persons to propose a Bitcoin ETF in the USA, the Winklevoss twins, lament that when they did the price of Bitcoin was $68 and nowadays is $64K. “That’s almost a 1000x return in the meantime. I’m glad we got here, but it has taken too long.”

When @cameron and I first proposed a bitcoin ETF in July 2013, the price of bitcoin was $68.

Today, upon the launch of two bitcoin futures ETFs, the price of bitcoin is $64,000.

That's almost a 1000x return in the meantime. I'm glad we got here, but it has taken too long.

— Tyler Winklevoss (@tyler) October 19, 2021

Also a skeptic of the Bitcoin Futures ETF‘s long term potential, Anthony Bertolino, VP of growth at iTrustCapital, told CNBC:

“The launch of the first bitcoin-linked ETF in the U.S. will bolster the broader crypto market and help an entirely new investor class experience the benefits of bitcoin as a legitimate asset. However, a derivatives-based bitcoin ETF is not where we want to be long-term.”

BTC price chart for 10/20/2021 on Forexcom | Source: BTC/USD on TradingView.com
What Are The ProShares Bitcoin Strategy ETF’s Characteristics?

The next few days will be crucial for this story. There’s a possibility that today’s demand was orchestrated, at least in part. If this happened, it’ll be very obvious in the following days. In any case, the fund’s official site defines the first Bitcoin Futures ETF as:

“ProShares Bitcoin Strategy ETF (BITO) is the first U.S. bitcoin-linked ETF offering investors an opportunity to gain exposure to bitcoin returns in a convenient, liquid and transparent way. The Fund seeks to provide capital appreciation primarily through managed exposure to bitcoin futures contracts.”

Related Reading | Grayscale Investments Set to File for Bitcoin Spot ETF as Competition Heats Up

And alerts the clients that “The fund does not invest directly in bitcoin,” and that “The price and performance of bitcoin futures should be expected to differ from the current “spot” price of bitcoin.” Forewarned is forearmed.

Featured Image: Screenshot of the ETF’s opening bell ceremony| Charts by TradingView

Posted on

Investing In Bitcoin Mining Businesses Is Also A Sign Of Institutional Acceptance

Last quarter, the New Jersey Pension Fund invested heavily in two Bitcoin mining giants. A small step for institutional investors, the move might represent something much bigger. There’s a hunger for Bitcoin exposure at the highest levels, but just owning the asset might be too risky or inconvenient for some of those big players. And, until the US government approves the long-awaited Bitcoin ETF, miners provide a much safer target. 

Related Reading | Marathon Digital Holdings Reported A 17% Spike In Bitcoin Mining

According to Coindesk:

The state-managed pension ended June with $3.66 million in Riot Blockchain (NASDAQ: RIOT) and $3.39 million in Marathon Digital Holdings (NASDAQ: MARA), according to disclosure documents.

New Jersey’s Common Pension Fund D has $30 billion in total assets for state employees.

The New Jersey Pension Fund’s intent is clear, and they put their money where their mouth is. However, is there a reason that explains why they don’t want to hold the asset? A legal reason, perhaps? The polemic Michael Saylor explains their rationale in this tweet: 

Many institutional investors find publicly traded Bitcoin miners to be attractive investments because they want BTC exposure but prefer to hold securities rather than property due to tax, accounting, & business considerations.

So, there are several reasons besides Bitcoin’s volatility. Nevertheless, there’s a hunger.

RIOT price chart - TradingView

RIOT price chart on Nasdaq | Source: RIOT on TradingView.com

Is Bitcoin Feasible As An Institutional Investment?

Bitcoin is maturing and spreading. The title phrase is the same NewsBTC used three years ago in an article that came to the conclusion that the asset wasn’t ready. We said:

In its current state, the market is highly speculative, with a majority of investors looking to make a quick buck. Institutional investors have seen that, and have mostly shied away from opening their wallets for the industry. These investors are looking for long-term returns, securing the trust of consumers over time rather than making a quick buck.

The tables turned. The situation changed. At the present, we are in an era in which some of the more innovative institutions already invested and drove the price to insane all-time highs… only to take their earnings and let it drop again. In any case, Bitcoin is proving its worth as institutional investment. About this situation, NewsBTC said:

These high wealth players with decades of market experience and all kinds of tactics on their side were paramount to driving prices up to $60,000 per coin. Unfortunately, the data above suggests they were also instrumental to the selloff that left retail traders with a bloody aftermath.

Related Reading | Brazil approves Bitcoin ETF – SkyBridge files for its own

What About a Bitcoin ETF? Is That In The Cards?

The only factor left unexplored is the possibility of a Bitcoin ETF in the US. As you should know, every financial institution and their mothers applied, and some of them have already been rejected. NewsBTC quoted Hester Pierce, Securities and Exchange Commission (SEC) Commissioner, who said about the situation:

(Institutions) want access to crypto through a regulated market. It makes sense for us to consider how to do that (…). We’ve dug ourselves into a little bit of a hole. A lot of people are looking for a way to access the asset class. We waited a long time to approve this kind of product.

Sadly for us, we’re still waiting.

Featured Image by MayoFi from Pixabay - Charts by TradingView
Posted on

Why Capital International’s $600M Investment In MicroStrategy Matters To Bitcoin

Capital International’s strategic investment in one of the most talked-about companies of the year shouldn’t raise any eyebrows. However, when that company is pursuing a never-before-seen strategy using a highly experimental digital asset, the world watches. It’s safe to say that Capital International believes in MicroStrategy as a company and in its CEO Michael Saylor. However, it’s also obvious that they’re buying exposure to Bitcoin. 

Related Reading | Indian Investments In Crypto Grow Rapidly As $40 Billion Milestone Is Reached

Let’s quote Cointelegraph for an overview: 

In MicroStrategy’s filings to the U.S. Securities and Exchange Commission, or SEC, for the second quarter of 2021, the firm disclosed Capital International Investors has purchased 953,242 shares of its stock. Following the release of the SEC filing, MicroStrategy’s stock price rose by more than 1.5% to reach $628.44 at the time of publication

That initial excitement didn’t last. Three days later, the stock trades at $589.52. And Bitcoin didn’t even react, “Despite the news of a major investment into a company with massive crypto holdings, the price of BTC was seemingly unaffected. Bitcoin has risen 2% in the last 24 hours to reach $33,438.” However, Capital International should be unfazed. Day-to-day movements are practically irrelevant when you’re investing in the future.

NewsBTC passes the mic to James Wo, CEO of the Digital Finance Group:

I believe that funds with a long investment horizon are de facto betting on Bitcoin’s growth in the long term. Many of them are either already exposed to bitcoin or very close to entering the market one way or another. 

Microstrategy price chart for 07/12/2021

MSTR price chart on Nasdaq | Source: TradingView.com

Why Invest In MicroStrategy And Not Just Buy Bitcoin

Actually, Michael Saylor himself answered this question while explaining his company’s Bitcoin strategy:

According to Saylor, his company offers two advantages. One, Microstrategy has the ability to sweep its software cash flow into Bitcoin. Two, they have the ability to raise debt financing. They can borrow a billion Dollars with zero percent interest. Your ETF will not be able to do that. 

And yes, he compared MicroStrategy stocks to an ETF because that’s his competition, not Bitcoin. Some investors want exposition to Bitcoin through a regulated market. And, despite the high demand and fillings by several high-profile financial institutions, the US SEC hasn’t approved an ETF. 

So, MicroStrategy is Capital International’s best option at the moment. Plus, they might be fans of Michael Saylor’s unapologetic approach to Bitcoin accumulation.

Why Capital International’s Investment Matters To Bitcoin

Institutional interest is there. And every day there are more options for that money to reach its destination. Not everyone is going to do everything they can to acquire more Bitcoin like MicroStrategy. All companies aren’t able to start developing Bitcoin tools and services like Square. Not everyone will develop ramps to accept Bitcoin for their product and then suspend the program for bogus reasons like Tesla. 

Related Reading | Binance Burns Record $600 Million BNB In Its 15th Quarter

Different options for different folks. However, there are risks involved. NewsBTC quotes Second Foundation Partners’ Ben Hunt: 

He describes the strategy as a way to accommodate and swallow Bitcoin, which is what they’ve done with every other financial innovation. Adding it’s preferable to stifle its censorship resistance and turn it into another Wall Street gaming table. The upshot to this is a future where people are encouraged to buy Bitcoin.

“Because the artistic Bitcoin identity I admire and value has been subverted by the neutering machine of Wall Street and the regulatory panopticon of the US Treasury Dept.

Did that already happen? Or can an open network like Bitcoin overcome this hurdle with ease? Members of the community do say that “Bitcoin doesn’t care” about mundane actions. In any case, institutional investment interest is there, and the chips will fall where they may. To close this, James Wo continues with the idea that funds are “betting on Bitcoin’s growth in the long term”:

A certain amount of this upward momentum has already been factored into the price we have at the moment. However, scarcity is an essential factor that is yet to show the real impact in the long term.

The game is just beginning, but the cards are already on the table. Things are looking good for Capital International and Bitcoin in the long term. Plus, the decentralized network even has scarcity as an ace up its sleeve. 

Featured Image by Mathieu Stern on Unsplash - Charts by TradingView