Bitcoin ETFs Suffer Major Outflows Amid Crypto Plunge

Bitcoin exchange-traded funds (ETFs) experienced a significant outflow of over $287 million on Tuesday, marking the largest withdrawal since May 1, according to Farside Investors data. This comes as investors reacted to a broader market selloff, with Fidelity leading the redemptions by selling more than $162 million worth of shares in its FBTC fund.

The initial enthusiasm surrounding bitcoin ETFs has waned in recent months, despite a strong debut that saw record-breaking numbers in the ETF market. Currently, spot bitcoin funds hold approximately $52.6 billion in assets under management, marking a $10 billion decrease from their peak.

The decline in bitcoin ETF assets can be attributed to the drop in the price of bitcoin, which peaked at over $73,000 in March but has since fallen to around $58,400. On Tuesday, bitcoin saw a 3% decline amid concerns of an economic slowdown fueled by weak manufacturing data.

Spot ether ETFs, which launched in July, also faced challenges as the cryptocurrency plunged by almost 6%, leading to outflows in related ETFs. JPMorgan analysts noted that redemptions were primarily driven by Grayscale, with investors unloading over $52 million worth of shares in its ETHE product.

Overall, flows into ether ETFs have been tepid, with only Fidelity’s spot ether product receiving inflows of $4.9 million. The total assets of spot funds have decreased to around $6.7 billion from $10.2 billion in July. Institutional ownership of spot bitcoin ETFs rose to 24% by the end of the second quarter, according to H.C. Wainwright analysts.

In the crypto ETF market, Goldman Sachs made a significant entrance by purchasing $418 million worth of bitcoin funds, while Morgan Stanley reduced its holdings to $189 million from approximately $270 million in the previous period.

With concerns over market selloffs and economic uncertainties, the future of bitcoin and ether ETFs remains uncertain. As investors navigate through volatile market conditions, the performance of these digital assets will continue to be closely monitored in the coming days.