"What Happened to Bitcoin ETF?" Newsletter: Market Chaos Looms as Fed Faces Hard Landing

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Welcome to "What Happened to Bitcoin ETF?”

In this week's edition, we will cover the key highlights from August 2nd to August 9th. We provide a concise and engaging analysis of the Bitcoin ETF market and review the overall performance of the Bitcoin market during this period.

Weekly Bitcoin ETF in Numbers

• Total AUM of Bitcoin ETFs (as of August 9th):

  $55,185,717,989 (Last week: $57,220,038,734)

  ₿911,174 (Last week: ₿914,257)

• Total Weekly Net Flow (August 2nd~August 9th):

  -$2,034,320,744 (Last week: -$4,859,225,109)

  -₿3,083 (Last week: -₿528)

• Top Weekly Performer:

  BlackRock (IBIT): +₿3,697

• Worst Weekly Performer:

  Grayscale (GBTC): -₿6,301

1/ Total AUM and Bitcoin Price Dynamics:

The Bitcoin ETF market faced significant challenges this week, reflecting the broader turbulence in the crypto sector. Following the recent market crash, the overall sentiment among investors remains cautious, as evidenced by substantial outflows across several funds.

On August 9, Bitcoin ETFs in the U.S. saw a net outflow of $89.7 million, following a strong inflow of $194 million just the day before. This sharp reversal highlights the volatility and uncertainty currently dominating the market. Grayscale’s GBTC fund was the most affected, with outflows amounting to $77 million, while Fidelity’s FBTC and Bitwise’s BITB also saw notable withdrawals.

Despite the overall downturn, there were some positive signs. BlackRock’s IBIT fund, the largest Bitcoin ETF by net value, managed to attract $9.6 million in inflows, and Hashdex’s DEFI fund recorded $15.6 million in new investments. These inflows suggest that while the market is experiencing significant challenges, there remains investor interest in Bitcoin ETFs, particularly in funds managed by well-known entities.

Ethereum ETFs did not fare much better, with net outflows totaling $15.8 million. However, BlackRock’s ETHA fund provided a bright spot with an inflow of $19.6 million.

Overall, the Bitcoin ETF market is navigating a complex and uncertain environment, with investor sentiment swinging between optimism and caution. The coming weeks will be critical in determining whether recent inflows can signal a broader recovery or if the outflows will continue to dominate.

Breaking News: Bitcoin ETF Trading Volume Surges Amid Market Crash

In the midst of a significant crypto market downturn, Bitcoin ETF trading volumes have skyrocketed, surpassing $1 billion at the start of trading on August 5. This surge in activity reflects the intense market volatility, with iShares Bitcoin Trust alone witnessing a staggering $875 million in trading volume within just 20 minutes, according to Alex Thorn, head of research at Galaxy Digital.

Despite the turbulent environment, Thorn anticipates net inflows into Bitcoin ETFs as investors seek to “buy the dip” following an approximately 8% drop in Bitcoin’s spot price since August 4. This market downturn has been heavily influenced by Ethereum’s sharp decline of 21%, triggered by significant sell-offs from major funds like Jump Trading and Paradigm VC.

The broader financial landscape has also contributed to this volatility. The S&P 500 has dropped more than 5% since August 1, exacerbated by poor U.S. unemployment data and significant position unwinds across various asset classes.

As the market struggles with heightened volatility, experts like Markus Thielen of 10x Research suggest that new crypto investments may slow until the market stabilizes, highlighting the ongoing challenges within the fiat-to-crypto on-ramp infrastructure and the broader macroeconomic environment.

2/ Bitcoin ETF Weekly Flow:

Ending Holdings on August 9 (WoW Change):

• IBIT (BlackRock): 347,767 BTC (+3,697 BTC)

• GBTC (Grayscale): 233,840 BTC (-6,301 BTC)

• FBTC (Fidelity): 176,951 BTC (-1,137 BTC)

• ARKB (Ark 21Shares): 46,021 BTC (-1,259 BTC)

• BITB (Bitwise): 37,797 BTC (-191 BTC)

• BTC (Grayscale Mini): 30,969 BTC (+742 BTC)

• HODL (VanEck): 10,917 BTC (-255 BTC)

• BRRR (Valkyrie): 8,877 BTC (+0 BTC)

• BTCO (Invesco Galaxy): 7,959 BTC (-117 BTC)

• EZBC (Franklin Templeton): 6,438 BTC (-406 BTC)

• BTCW (WisdomTree): 3,494 BTC (+2,177 BTC)

• DEFI (Hashdex): 144 BTC (-34 BTC)

Total: 911,174 BTC (-3,083 BTC)

3/ Looking Ahead:

A Surge of Capital Could Soon Enter Bitcoin ETFs:

The landscape for Bitcoin ETFs may be set for a significant shift as major financial institutions begin to embrace these products. Morgan Stanley, one of the largest asset managers globally, is now allowing its financial advisors to offer spot Bitcoin ETFs to eligible clients. This move could open the floodgates for more investments into Bitcoin as financial advisors pitch these products to their clients, many of whom rely on expert guidance for their investment decisions.

Morgan Stanley’s decision to offer iShares Bitcoin Trust (IBIT), managed by BlackRock, and Wise Origin Bitcoin Fund (FBTC), managed by Fidelity, marks a pivotal moment for Bitcoin. As these financial giants start promoting Bitcoin ETFs, the influx of funds could drive up demand for Bitcoin, potentially boosting its price.

The competition in the investment world is fierce, and other asset managers are likely to follow Morgan Stanley’s lead. This collective momentum could see a substantial increase in money flowing into spot Bitcoin ETFs, with a noticeable impact expected by the end of 2024.

Additionally, BlackRock predicts that crypto ETFs will be included in model portfolios by the end of this year. Such a development would further legitimize Bitcoin as an investment and attract more capital into the crypto markets.

For private investors, the advantage lies in their ability to purchase real Bitcoin directly, bypassing intermediaries like BlackRock and avoiding additional commissions. This unique position allows individual investors to act swiftly in a market where timing and direct ownership can offer a significant edge.

4/ 🔥What’s Trending Now?:

Signs of Strain: Bond Yields and Labor Market Woes Signal Economic Uncertainty

The latest headline from The Wall Street Journal, dated August 3, 2024, reads, “Lousy Jobs Report Forces Fed to Reckon With Hard Landing.” This report has stirred concerns about the U.S. economy’s direction as the labor market shows clear signs of strain. With inflation previously being the Fed’s primary focus, the attention is now shifting toward the broader implications for economic stability, raising the possibility of a hard landing rather than the hoped-for soft landing.

In the bond market, U.S. Treasury yields are providing clear signals of growing economic anxiety. The 2-year Treasury yield, depicted in its weekly chart, has been forming a rounding top, a classic reversal pattern, and has recently broken through its support level, dropping into the 3% range. Historically, recessions have tended to follow within 6 to 12 months after the Fed’s rapid interest rate hikes, and we are now 13 months removed from the last rate increase in July 2023. This shift suggests that investors are increasingly viewing the 4% yield as a buying opportunity, driven by heightened recession fears.

On a daily chart, the 2-year Treasury yield underscores the shifting narrative among market experts. Just a month ago, there was optimism about a “no landing” or “soft landing” scenario. However, recent developments have pushed the conversation toward the possibility of a hard landing, reflecting the market’s direct response to evolving economic conditions.

Meanwhile, the 10-year Treasury yield has also made significant moves, breaking past both the 4.3% level at the end of 2023 and the psychologically important 4.0% resistance level. This movement suggests that investors might be bracing for a return to near-zero interest rates, signaling a potential bull market in 10-year Treasuries. Every time the yield rises above the established trend line, additional buying may occur as investors attempt to anticipate the Fed’s next steps in response to a possible hard landing.

Reflecting on past market behavior, particularly during the 2020 pandemic, offers valuable insights. The S&P 500’s reaction during that period showed a pattern of initial sharp declines and high volatility, followed by aggressive intervention from the Fed. This intervention, which included massive liquidity injections, ultimately led to a market rally. These historical trends indicate that the Fed’s actions will be critical in determining the market’s trajectory if the economy faces another downturn, reinforcing the importance of central bank policies in navigating potential economic crises.

5/ This Week’s Bitcoin Mindset:

1. Classic Bitcoin FOMO Cycle: Rinse and Repeat 🤣

2. Bitcoin Faces Another Grim Year—But the Elite Are Ready to Welcome It In

🍫CRYPTO CRUMBS ON THE TRAIL 🍫

Dive into this week's crunchy bites of important news, serving up the freshest updates and insights from the crypto world.

Here's what's on the menu:

1. 4 years in, MicroStrategy’s Bitcoin gamble beats Warren Buffett’s warning

   MicroStrategy's stock value is up by 1,000% since its first Bitcoin purchase, while Warren Buffett and Berkshire Hathaway have missed the...

2. Bitcoin On-Chain Indicators Shifting Back to Bull Market, According to CryptoQuant CEO

   CryptoQuant head Ki Young Ju says that on-chain data is signaling that the Bitcoin (BTC) bull market is back on.

3. Bitcoin Miner Marathon Digital Plans $250M Private Note Sale to Fund Bitcoin Buying

   The notes will pay interest every six months and mature Sept. 1, 2031. The rate of interest and conversion rate will be set during the...

4. Bitcoin metric calls ‘local bottom’ as traders eye sub-$60K BTC price

   BTC price targets extend below $60000 as a bottom-finding Bitcoin metric calls for a market reversal.

5. California City Launches New ‘Bitcoin Office’ Dedicated to ‘Transformative Potential’ of BTC

   A city in California is launching a new office dedicated to educating the community about Bitcoin (BTC).

That’s it for today; stay tuned for more updates and insights in our next edition!

Stay charged,

SmashFi Team

P.S. - Follow me on X (@brianhoonjong) for daily doses of insightful updates on Bitcoin ETFs and beyond! 🚀🐦

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“What Happened to Bitcoin ETF?” Newsletter: Dissecting the daily crypto craze with sharp insights and electrifying updates.

Disclaimer: This newsletter is for the brainy and the brave. It's for informational purposes only and not a substitute for investment advice. Always do your own research.