"What Happened to Bitcoin ETF?" Newsletter: U.S. Recession Fears, Global Liquidity Trends, and Bitcoin's Outlook

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Welcome to "What Happened to Bitcoin ETF?”

In this week’s edition, we’re bringing you the key highlights from September 23 (Mon) to September 30 (Mon). We’ll provide a concise and insightful analysis of the Bitcoin ETF market, along with a review of Bitcoin’s overall performance during this period.

Weekly Bitcoin ETF in Numbers

• Total AUM of Bitcoin ETFs (as of September 30):

  $59,012,682,067 (Last week: $57,926,256,521)

  ₿931,707 (Last week: ₿914,446)

• Total Weekly Net Flow (September 23~September 30):

  +$1,567,467,804 (Last week: +$6,702,161,427)

  +₿18,185 (Last week: +₿43,197)

• Top Weekly Performer:

  BlackRock (IBIT): +₿8,898

• Worst Weekly Performer:

  Grayscale (GBTC): -₿449

1/ Total AUM and Bitcoin Price Dynamics:

The U.S. spot Bitcoin ETF market has seen a sharp surge in growth, driven by the Federal Reserve’s interest rate cut announcement and BlackRock’s increased Bitcoin holdings. Last week, the net inflow into spot Bitcoin ETFs exceeded $1 billion, with an impressive $495 million pouring in on September 27 alone.

According to Farside Investors, a financial data platform, the U.S. spot Bitcoin ETF market experienced a total net inflow of $494.4 million on September 27, 2024. This marks the largest inflow since July 19 and represents seven consecutive trading days of positive inflows.

Among top-performing ETFs, Ark Invest’s ARKB led the charge with $203 million in net inflows, followed by Fidelity’s FBTC with $123 million and BlackRock’s IBIT with $111.7 million. Of particular note is BlackRock’s increasing activity. Recent SEC filings show that BlackRock’s Global Allocation Fund increased its IBIT shares from 43,000 in June to 198,874 by July 31. IBIT’s nine-month cumulative net inflows have now surpassed $21.3 billion.

This strong demand far exceeds Bitcoin’s daily production rate. Over the past week, approximately 17,009 BTC were absorbed by ETF products, a figure more than 37 times greater than the daily production rate of 450 BTC. This underscores the sustained appetite for Bitcoin ETFs among institutional investors.

These market developments are also positively impacting Bitcoin’s price. As of October 2, Bitcoin’s price reached $61,837.10, reflecting a 7.12% increase from the previous month, with a market capitalization of $1.3 trillion. Analysts predict this trend could fuel further Bitcoin price growth throughout Q4 2024.

In conclusion, the rapid expansion of the U.S. spot Bitcoin ETF market highlights robust institutional demand. The active participation of large asset managers like BlackRock reinforces Bitcoin’s potential as a long-term asset and inflation hedge. If these trends continue, Bitcoin’s bullish momentum is expected to strengthen in the final quarter of 2024.

2/ Bitcoin ETF Weekly Flow:

Ending Holdings on September 30 (Weekly Change):

• IBIT (BlackRock): 366,448 BTC (+8,898 BTC)

• GBTC (Grayscale): 221,191 BTC (-449 BTC)

• FBTC (Fidelity): 180,345 BTC (+3,278 BTC)

• ARKB (Ark 21Shares): 50,535 BTC (+3,930 BTC)

• BITB (Bitwise): 39,430 BTC (+1,116 BTC)

• BTC (Grayscale Mini): 33,752 BTC (+433 BTC)

• HODL (VanEck): 11,992 BTC (+622 BTC)

• BRRR (Valkyrie): 8,982 BTC (+120 BTC)

• BTCO (Invesco Galaxy): 8,076 BTC (+150 BTC)

• EZBC (Franklin Templeton): 7,104 BTC (+87 BTC)

• BTCW (WisdomTree): 3,708 BTC (+0 BTC)

• DEFI (Hashdex): 144 BTC (+0 BTC)

Total: 931,707 BTC (+18,185 BTC)

3/ Looking Ahead:

Possibility of a U.S. Recession Becomes More Real

Recent expert opinions on the U.S. economy remain divided between recession and a moderate slowdown. To understand this, we must first look at the concept of bond yields. Bond yields refer to the interest rate the government pays to borrow money. Normally, the longer the borrowing period, the higher the interest rate. However, for the past two years, short-term borrowing rates have been higher than long-term ones—a phenomenon called an inverted yield curve, signaling market expectations of worsening economic conditions.

However, this situation is now changing. Short-term rates are starting to drop below long-term rates, which suggests that market participants may be viewing the future economy more optimistically. This shift could mean:

1. Easier access to loans for companies,

2. Increased opportunities for business investment,

3. A general boost in economic activity.

This change can be interpreted as a signal that the Federal Reserve might not tighten the economy too aggressively, offering a hopeful outlook for future economic conditions.

However, a key concern remains: recession. While a normalizing yield curve might be good news, if the likelihood of a recession is high, the story changes. Historically, the effects of an inverted yield curve take about 1.5 to 2 years to manifest, typically resulting in a recession. The Federal Reserve’s rapid rate hikes in 2022 to curb inflation may return as a recessionary impact within this timeframe.

Though inflation is stabilizing, the issue now lies in the labor market. Wall Street expects the U.S. Department of Labor’s September jobs report to show 140,000 new jobs and an unemployment rate of 4.2%. If true, it could ease fears of a recession. However, Citigroup warns of a sharp labor market decline, predicting only 70,000 new jobs and a 4.3% unemployment rate. Citi expects the Fed to cut rates by 50 basis points in November and even hints at a 75 basis point cut if conditions worsen.

If Citi’s outlook proves accurate, fears of a recession could spread rapidly, potentially causing a downturn in risky asset prices, including Bitcoin.

4/ 🔥What’s Trending Now?:

1. Global Trend of Central Bank Liquidity Easing Resumes

A significant shift is being observed in the global financial markets, with signs of liquidity expansion re-emerging after years of tight monetary policies. Among the nations leading this trend is China.

Last week, the People’s Bank of China (PBOC) pledged to implement aggressive stimulus measures to revitalize its struggling economy. In addition to traditional interest rate cuts and the relaxation of lending conditions, the Chinese government introduced a policy to offer direct loans to investment funds, encouraging them to purchase Chinese stocks. As a result, China’s CSI300 index surged by more than 15% within a week, marking its largest gain in 15 years.

Similarly, the United States is also shifting toward liquidity expansion. The M2 money supply in the U.S. grew by 1% in August, bringing it within 3% of the peak seen in early 2022. Furthermore, market optimism has soared following the Federal Reserve’s first interest rate cut in four years, pushing the S&P 500 to a new all-time high.

This global liquidity expansion is also having a positive impact on the Bitcoin market. Last week, Bitcoin prices surpassed $65,000 for the first time in several months. Although predicting short-term price movements remains difficult, with interest rates stabilizing globally and expectations of large-scale fiscal spending under any new U.S. administration, Bitcoin is likely to follow its historical trend of rallying after elections.

In conclusion, the global trend of liquidity expansion is creating a favorable environment for risk assets like Bitcoin. However, investors should remain cautious due to increased market volatility.

2. Is Bitcoin Staking Safe?

Recently, I shared some thoughts on a rising trend that’s catching a lot of attention: Bitcoin staking yields. At Token2049, I noticed more and more people talking about staking on Bitcoin, but here’s the problem—it’s dangerous and can lead to serious risks for investors.

In my latest X/Twitter thread, I break down why these so-called yields aren’t what they seem and how they stray away from Bitcoin’s core principles. I also dive into historical examples that show why chasing these returns could end in disaster.

Check out the full thread and see why Bitcoin staking could be a trap:

5/ This Week’s Bitcoin Mindset:

The image above shows the “Hodl’er Cheat Sheet,” a circular graph illustrating the 4-year Bitcoin cycle. It encapsulates Bitcoin’s historical market behavior over the last 15 years. Each complete rotation represents a 4-year cycle, broken down into 12 emotional phases experienced by investors—ranging from Optimism and Belief to Euphoria, Complacency, Panic, and eventually Hope.

This cheat sheet provides a one-word summary of investor sentiment at each stage of the 4-year cycle, demonstrating how market patterns influence emotions. As Bitcoin’s price follows a consistent rise and fall pattern, this emotional framework offers valuable insight into the psychology of investors across market phases.

As of October 2024, Bitcoin investors have just entered the Optimism phase, hinting at a potential bull run in 2025, which could advance through the Belief phase and reach the Euphoria stage within a year. Historically, the highest peaks in Bitcoin’s price occur at the end of the 4-year cycle, often corresponding with Euphoria, represented by dark green dots on the chart. If the current pattern continues, a major price rally could be expected by the end of 2025.

The chart’s color progression from red to green reflects the profitability of short-term holders (those holding Bitcoin for under 5 months). Red indicates losses, while green represents profits. The darker the green, the higher the profits, signaling a booming market. Each cycle’s peak tends to coincide with high profitability for short-term holders, occurring in the second quadrant when Bitcoin gains mass attention, attracting a wave of new investors.

If you believe that past cycles will repeat, now could be an ideal time to accumulate Bitcoin. The key to maximizing returns is holding as much Bitcoin as possible during the cycle’s peak. A disciplined approach, such as Dollar-Cost Averaging (DCA), where you steadily accumulate Bitcoin over time, is a highly effective strategy to build wealth.

In conclusion, this “Hodl’ers Cheat Sheet” is not just a graph but a compass for Bitcoin investing. Like a surfer riding the waves, investors can navigate market cycles wisely by understanding this chart. It serves as a guide, showing the path toward financial opportunity in the age of digital gold. Smart investors follow the rhythm of this cycle while keeping their focus on the long term.

🍫BITCOIN CRUMBS ON THE TRAIL 🍫

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

Here's what's on the menu:

1. ‘Expect Fireworks’—BlackRock CEO Issues ‘Crazy’ Fed Warning As A China ‘Tsunami’ Is Predicted To Hit Crypto And The Bitcoin Price

   Bitcoin -1.2% has swung wildly over the last few months as Donald Trump, China, BlackRock and the Federal Reserve fuel a perfect...

2. I Doubt Mr. Trump’s Plan For A Bitcoin Hoard Will Sway Voters

   I think it's unlikely that crypto voters will say the election, but there's a possibility the crypto money wil.

3. Ex-Chinese Vice Minister Urges China To Assess Cryptocurrencies Following US Bitcoin Pivot: Report

   A former high-ranking Chinese government official is reportedly urging his country to look into cryptocurrencies.

4. Binance Trader Says 'Stars Are Aligned For Q4 To Be Bullish': His Shopping List Includes Dogwifhat, Pepe But No Dogecoin, Shiba Inu

   A prominent Binance trader forecasts an all-time high for Bitcoin (CRYPTO: BTC) until the end of the year.

5. Bitcoin drops below $62K as Iran launches missile attack on Israel

   Bitcoin drops below $62K as Iran's missile attack on Israel escalates, causing market uncertainty and a significant selloff.

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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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.