Bitcoin ETFs Face Losses as $2.8B Exits Amid Price Drop

TLDR

• Bitcoin ETFs experienced $2.8 billion in outflows over two weeks, signaling investor withdrawal.
• The average purchase price for Bitcoin ETFs is now underwater due to Bitcoin’s recent price drop.
• Institutional investors in Bitcoin ETFs are holding onto their positions despite the ongoing market downturn.
• Total assets under management for U.S. Bitcoin ETFs have dropped by 31.5% since their October peak.
• Technical indicators suggest Bitcoin may enter a bear market if recovery does not occur soon.

Bitcoin’s price drop has placed the average purchase price of Bitcoin ETFs underwater. This comes after a significant outflow of funds from the funds in recent weeks. According to Alex Thorn, head of research at Galaxy, Bitcoin ETFs are now facing losses due to these outflows, which hit $2.8 billion in just two weeks. The funds hold substantial amounts of Bitcoin, but the current market downturn has left their investments below their average cost basis.

Bitcoin ETFs Struggling as Market Falls

The U.S. Bitcoin ETFs now hold approximately $113 billion in assets under management. The funds collectively possess around 1.28 million Bitcoin, implying an average cost basis of $87,830 per Bitcoin. As Bitcoin’s price recently dropped by 11%, falling from $84,000 to $74,600, these Bitcoin ETFs are now underwater, with purchases made at a higher price than their current value.

This downturn follows a troubling two-week period, in which Bitcoin ETFs recorded a $2.8 billion outflow. The ETFs lost $1.49 billion in one week, and another $1.32 billion the following week. These outflows suggest a lack of confidence from investors as Bitcoin’s price struggles.

Institutional Investors Hold Strong Despite Losses

Despite the ongoing downturn, institutional investors in Bitcoin ETFs are holding their positions. Thorn noted that the cumulative inflows into Bitcoin ETFs have only decreased by 12% from their peak, whereas Bitcoin itself has seen a larger drop of 38%. Even though the total assets under management for Bitcoin ETFs have declined by 31.5% from their October peak of $165 billion, institutional investors have been holding on to their assets.

This indicates that while the Bitcoin ETF market has experienced significant outflows, many institutional investors remain committed to their holdings, reflecting their long-term view on the asset.

Bear Market Concerns Grow as Recovery Stalls

The recent drop in Bitcoin’s price has raised concerns about the potential for a bear market. Nick Ruck, director at LVRG Research, warned that if Bitcoin does not recover soon, it could enter a fully-fledged bear market. “BTC may enter into a bear market if it continues to drop further,” Ruck said, referencing technical indicators that show long-term sell pressure.

The ongoing decline is also compounded by broader market uncertainty. Geopolitical tensions and the struggles of the U.S. economy, including rising unemployment and inflation, have contributed to the sell-off in crypto markets.

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