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Every US Bitcoin ETF Experiences Inflows – US Job Market Weakness and Middle East Ceasefire Talks Boost Risk Appetite

Last Updated May 9, 2024 1:44 PM
Shraddha Sharma
Last Updated May 9, 2024 1:44 PM

Key Takeaways

  • Every US Bitcoin ETF witnessed positive inflows on May 3 and May 6, reversing a four-week streak of outflows.
  • The influx was influenced by worsening US job market data and optimistic ceasefire talks in the Middle East.
  • Despite a volatile start to May, the sustained inflows suggest increasing risk appetite among investors.

Bitcoin ETFs witnessed  4 continuous weeks of outflows until May 3 on the back of the Fed’s status quo and geopolitical tensions

Every Bitcoin ETF in the US broke this trend on May 3 as they witnessed positive inflows. The shift in investor sentiment aligns with weakening US job market data and ceasefire talks in the Middle East, suggesting a growing appetite for risk among investors. 

2 Consecutive Days of Bitcoin ETF Inflows

On May 3, all Bitcoin ETFs witnessed simultaneous positive inflows for the first time since their January debut, reaching a total of $378.3m across funds. Data by Farside Investors find that FBTC garnered $102.6m, the highest inflows among players. Franklin Bitcoin ETF EZBC followed with $60.9m in inflows. 

BITB recorded $33.5m, BRRR recorded $35.6m and BTCO got in $33.2m in inflows. 

Other significant contributions included $12.7m for IBIT and $28.1m for ARKB. It’s important to note that BlackRock’s IBIT experienced no flows from April 24 to April 30, with its first outflow of approximately $37m occurring on May 1—a day that saw negative flows across all Bitcoin ETFs. 

Following a stagnant day on May 2, May 3 marked a positive shift in inflows. Grayscale is particularly noteworthy for its continuous outflows since its January debut. However, the fund saw inflows of $63m and $3.9m on May 3 and May 6, respectively. 

The inflows continued on May 6, with data indicating total inflows of $217m; FBTC led with $99.2m, closely followed by ARKB with $75.6m. Although lower than May 3, IBIT still managed to add $21.5m, with all ETFs adding $217m. 

However, provisional data for May 7 suggests a potential halt to this trend, with GBTC already experiencing outflows of at least $28.6m.

What Led to the Inflows?

Bitcoin is considered a risk asset and is impacted by macroeconomic factors. 

Investors have been anxious about the Federal Reserve’s delay in rate cuts. Another reason that has kept risk assets subdued is the Israel-Gaza conflict in the Middle East.

The US employment report released on May 3 spurred optimism of an earlier rate cut. There were expectations that the Federal Reserve would cut interest rates multiple times in 2024. However, the Federal Reserve’s decision to maintain interest rates could change after the US economy added just 175,000 jobs in April. 

On May 6, Hamas announced  its acceptance of a ceasefire proposal brokered by Egypt and Qatar. Although Israel indicated that discussions would continue, the announcement suggested the possibility of a temporary halt in the Middle East conflict. The development provided another reason for investors to maintain their interest in riskier assets this week. 

Hong Kong ETFs Overshadow US Bitcoin ETFs

According to a report by CoinShares, digital asset investment products experienced outflows for the fourth consecutive week, totaling $251m globally. 

CoinShares  calculate the average purchase price of these ETFs since their launch at $62,200 per Bitcoin. A price dip of 10% likely triggered automatic sell orders. 

According to the report, the week closing on May 3 saw measurable outflows from Bitcoin ETFs in the US. Conversely, the launch of spot-based ETFs in Hong Kong painted a brighter picture, attracting inflows of $307m in their first week of trading. 

 Travis Kling of Ikigai Asset Management notes that from January to March, there were $12b in net inflows from Bitcoin ETFs. The figure contrasted by $800m in outflows during the last three weeks of April—$350m of which was from ETFs other than GBTC. 

Kling questions why investors who entered the market in the early months became sellers in late April. He speculates whether concerns over the Federal Reserve’s interest rate policies, global liquidity conditions, or quick profit-taking might have influenced these decisions. 

ETF Flows Might Remain Positive

The recent inflows into Bitcoin ETFs signify a possible turning point for risk sentiment among investors, driven by macroeconomic uncertainties and geopolitical developments. 

With the US job market showing signs of weakness, analysts now see that the Fed might do a rate cut sooner. The expectations are positive for Bitcoin ETFs. 

Additionally, with ongoing ceasefire negotiations in the Middle East, there could be an observable shift towards riskier assets. Looking forward, the sustainability of these inflows will likely hinge on further developments. 

However, the fund flow trends could continue in anticipation of the positive developments. 

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