Welcome to this week's edition of the “What Happened to Bitcoin ETF?” Newsletter, where we bring to light the ebbs and flows of the Bitcoin market through the lens of ETFs. Strap in as we dissect the movements, uncover trends, and gaze into the crystal ball for the week ahead.

1/ Total AUM and Net Flow Dynamics:

Last week has been marked by volatility and strategic adjustments, reflecting broader market sentiments and investor maneuvers.

Starting on March 11, the total AUM stood at a robust $57.95 billion, indicating strong market participation. However, by March 15, we noticed a dip to $57.85 billion, highlighting a significant retraction in investor confidence or asset valuation. This trend of contraction continued, with the AUM further shrinking to $56.15 billion by March 18, and reaching its nadir on March 22 at $52.62 billion. This sequence underlines a period of cautious market behavior, with potential sell-offs and value reassessments.

Interestingly, the market began showing signs of recovery by March 25, with the total AUM climbing to $58.61 billion, suggesting a revival of investor interest or asset appreciation. However, this rebound appeared to stabilize somewhat by March 26, with a slight decrease in total AUM to $57.32 billion.

2/ BTC Holdings Weekly Flow:

At the outset on March 11, the total BTC holdings of all Bitcoin ETFs amounted to 810,302. By the end of the week on March 15, there was an increase to 838,218, marking a net gain of 27,916 BTC. This rise reflects a period of accumulation, possibly indicating a bullish sentiment among ETF managers or a response to favorable market conditions.

Moving into the week of March 18-22, the scenario shifted. The total holdings slightly receded to 825,356, reflecting a decrease of 12,862 BTC from the previous week's high. This reduction could signify profit-taking, portfolio rebalancing, or a more cautious stance amidst market volatility.

This week(from March 25-26), the holdings saw a marginal uptick, closing at 827,634 BTC. This minor increase of 2,278 BTC, albeit modest, suggests a stabilization in the ETFs' strategic approaches to holding BTC, following the previous week's net outflow.

3/ Implications for Market Sentiment:

The accumulation phase between 3/11~3/15 indicates a strong buying interest or optimism towards BTC's market outlook. However, the subsequent decrease in holdings signals a cautious or profit-taking approach, possibly in response to market dynamics or anticipation of short-term volatility. The slight recovery in this week may indicate a settling market or a cautious return to accumulation, reflecting nuanced strategies among ETF managers in navigating the crypto market's inherent uncertainties.

For investors and market watchers, these shifts in BTC holdings across ETFs offer valuable insights into broader market sentiment and potential price movements, underscoring the importance of monitoring such trends for informed decision-making. ​

4/ GBTC(Greyscale)'s Outflow Trend:

From March 11, 2024, starting with 395,745 BTC in holdings, GBTC experienced a notable reduction to 342,608 BTC by March 26, 2024. This shift represents a cumulative outflow of 53,137 BTC over our observation period. Such a substantial outflow is critical for our readers to consider, as it not only reflects GBTC's current stance but also has the potential to offset inflows into other Bitcoin ETFs, thereby exerting pressure on Bitcoin's spot price. 

5/ Looking Ahead:

After a detailed review of the Bitcoin ETF flows from March 11 to March 26, 2024, it's apparent that the market experienced a period of decline followed by a recent uptick. This week, particularly the transition from significant outflows to a more stabilized or slightly positive flow, suggests a potential shift in investor sentiment and market dynamics.

Given this recent change in direction, the prediction for the remainder of the week, from March 27 to March 29, leans towards a cautiously optimistic outlook. The trend indicates a possible continuation of this week's modestly positive inflow into Bitcoin ETFs. This could be driven by a combination of factors, including renewed investor confidence, strategic buying opportunities seized by market participants, or a broader stabilization in the cryptocurrency market.

In conclusion, based on the recent uptick in flows, we anticipate a continuation of this positive trend for the remainder of the week. Investors seem to be gradually regaining confidence, potentially leading to increased inflows into Bitcoin ETFs as the week progresses.

• Note: All data sources are from the Bitcoin ETF Fund Flows.

What’s Hot This Week?

1/ A Game-Changer for Bitcoin: ETF Approval on the Horizon in Hong Kong 🇭🇰 

Exciting developments are afoot in Hong Kong that promise to significantly impact the Bitcoin investment landscape. According to Bloomberg, the Hong Kong Securities and Futures Commission (SFC) is on the verge of a groundbreaking decision that could usher in a wave of capital inflow from Chinese investors into the Bitcoin ecosystem. The SFC is expected to green-light in-kind creations and redemptions for spot bitcoin ETFs as early as the second quarter of this year.

This move is pivotal for several reasons. Firstly, it opens a legal gateway for mainland Chinese investors to venture into Bitcoin investments through a regulated framework. Secondly, the allowance of in-kind redemptions marks a significant departure from cash-only redemptions, aligning with global ETF practices that favor cost efficiency, tax optimization, and enhanced liquidity.

The anticipation around this decision stems from the recent applications for spot bitcoin ETFs by prominent Chinese asset managers. With no spot ETF approved yet, the market is ripe for an influx of "approved" capital into Bitcoin, potentially catalyzing a new era of investment from the region.

The implications of this development cannot be overstated. The Asian crypto market, known for its volume and crypto-savviness, stands on the brink of a transformative phase. As Noelle Acheson, a notable crypto analyst, suggests, even a modest engagement from Chinese investors through this new legal avenue could have significant ramifications for Bitcoin's valuation and the broader crypto market.

Stay tuned as we continue to monitor this evolving story, poised to reshape the investment dynamics in one of the world's most vibrant financial hubs.

2/ Spotlight on Bitcoin ETFs: Outshining the Competition

In a remarkable showcase of performance, BlackRock and Fidelity’s spot bitcoin exchange-traded funds (ETFs) have eclipsed the achievements of 3,122 other funds this year. Their record of net inflows for 49 days straight places them ahead of 95% of traditional funds.

According to Bloomberg data analyzed by ETF analyst Eric Balchunas, only 30 ETFs have ever surpassed the streak managed by BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC) this year. The current record holder, JP Morgan’s JEPI, stands at 160 days, a milestone IBIT and FBTC could surpass by mid-June if their stellar performance continues.

This achievement is particularly noteworthy because it demonstrates consistent investor confidence in Bitcoin, regardless of daily price fluctuations. The price of the bitcoin ETF shares closely mirrors the Bitcoin price within 1%, yet data reveals that investor interest in IBIT and FBTC shares has remained strong even on days when Bitcoin's price declined.

Balchunas’ analysis further highlights the significant impact of these funds on their respective companies. Net inflows into IBIT now constitute over half of BlackRock's net flows year-to-date (YTD), outperforming all other 420 ETFs in their portfolio. Similarly, Fidelity has seen 70% of its total inflows come from FBTC, which has attracted 5x more than any other of their ETFs.

Despite a roughly 10% drop in Bitcoin's price since reaching new all-time highs earlier this month, the influx of investments into most bitcoin ETFs has not waned. While Grayscale has faced continuous outflows totaling $13.8 billion since January 11, the nine 'newborn' spot bitcoin ETFs have collectively amassed $25 billion in inflows.

IBIT and FBTC stand out, having recorded inflows every day since their launch. This distinguishes them significantly in a market that has seen diverse inflow and outflow dynamics across various bitcoin ETF offerings. In the broader landscape of all ETFs in the United States this year, IBIT boasts the second highest inflow, with FBTC not far behind, marking their undeniable appeal to investors seeking cryptocurrency-related investment vehicles.

This week's highlight underscores a burgeoning investor appetite for Bitcoin ETFs, reflecting a broader trend of increasing diversification in investment portfolios, especially those incorporating cryptocurrency assets. The stellar performance of IBIT and FBTC is a beacon for savvy investors, signaling the growing integration of cryptocurrencies into mainstream investment strategies.

3/ Goldman Sachs Sees Spike in Crypto Activity After BTC ETF Launch

Following the SEC’s approval of 11 spot Bitcoin ETFs in January, Goldman Sachs’ clients are significantly increasing their engagement in crypto-related trades. Max Minton, Goldman’s Head of Digital Assets in Asia, reports a "resurgence of interest and activities" in crypto from their clients, with a focus on crypto derivatives and portfolio diversification.

This shift indicates a move from a quieter previous year to an active exploration and investment in the crypto space, especially in Bitcoin (BTC). Minton also hints at a potential increase in interest towards Ethereum (ETH) pending an SEC ETF approval.

Matthew McDermott, reinforcing this sentiment, highlights the role of retail traders in driving the current crypto bull market. Goldman’s continued development of its crypto trading team since its 2021 launch reflects an adapting strategy to meet the evolving demands and interests of their clients in the cryptocurrency market.

🐦 Hot Tweet of the Week

1/ Investors Tune Back Into Bitcoin ETFs & Self Custody Buyers Seize the Dip

This week's spotlight tweet comes from prominent crypto analyst Willy Woo, highlighting a notable trend reversal in the Bitcoin space:

His graph shows the recent trend in Bitcoin network flows, where after a period of selling, ETF flows are gradually returning. Even more significant is the surge in buying by self-custody investors, who have taken advantage of lower prices to increase their holdings. This activity signals growing confidence among investors, suggesting a bullish outlook on Bitcoin's future trajectory.

Check out the tweet to see how the landscape is shifting!

2/ The New Era of Bitcoin: Institutional Funds Make Their Mark

This week's focus is drawn to an enlightening tweet from Ki Young Ju, emphasizing a significant shift in the Bitcoin investment landscape:

The attached graph illustrates the remarkable influx of institutional funds into Bitcoin, with a staggering $86 billion flowing into the market recently. Highlighted in the graph is the dominant role of financial giants like BlackRock, marking a pivotal moment where institutional investment is making a pronounced impact on the Bitcoin market.

The graph also shows a substantial increase in Bitcoin's realized cap for short-term whales, alongside the noted institutional purchases by BlackRock and significant company BTC purchases, notably by MicroStrategy.

This surge in institutional interest is shaping a distinct investment cycle, with profound implications for Bitcoin's future market dynamics.

🍫CRYPTO CRUMBS ON THE TRAIL 🍫

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

Here's what's on the menu:

1. Bitcoin gears up for a ‘massive’ short squeeze, price could go ‘vertical’

2. BlackRock says bitcoin returns likely to come down now that it has been embraced by Wall Street

3. Bitcoin Ready To ‘Teleport Higher’ After Pulling Head Fake, Says Real Vision Analyst Jamie Coutts

4. Bitcoin whale accumulation suggests pre-halving BTC rally will continue

5. Altcoins Gearing Up To Outperform Bitcoin Following ‘Very Healthy’ Correction: Trader Michaël van de Poppe

Stay tuned to "Crypto Crumbs on the Trail" for your weekly dose of important crypto news, keeping you informed and ahead in the ever-evolving world of digital assets.

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SmashFi Team

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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.