Key Points
- Despite slowing inflows and Bitcoin’s price decline, over 95% of invested capital remains in Bitcoin exchange-traded funds.
- U.S. spot Bitcoin ETFs have seen substantial outflows, and other indicators suggest weakening Bitcoin market.
Bitcoin exchange-traded funds (ETFs) have retained more than 95% of their capital investment, even as inflows decrease and the price of Bitcoin falls. This information comes from James Seyffart, a senior Bloomberg ETF analyst.
Bitcoin ETFs Resilience
Seyffart noted on March 14 that inflows into Bitcoin ETFs have decreased, falling to $35 billion from a high of $40 billion. Despite a 25% drop in Bitcoin’s price, most of the funds, totaling $115 billion in assets under management, remain intact.
This resilience, according to Seyffart, is similar to that seen in traditional U.S. stock ETFs. Long-term investors in these ETFs tend not to panic sell during market downturns, but continue to buy. Seyffart suggests this behavior indicates a shift from short-term speculation to long-term wealth-building strategies.
Market Indicators
Meanwhile, data from SoSoValue reveals that U.S. spot Bitcoin ETFs have experienced $870 million in outflows in the past week and $1.6 billion in the past month. Analysts interpret these recent outflows as a typical case of “buy the rumor, sell the news.”
The Strategic Bitcoin Reserve initiative was first mentioned by Trump in July 2024, which led to speculations and more investors buying Bitcoin. However, by the time the official announcement was made at the Crypto Summit, the market had already priced it in, leading to a sell-off.
Other indicators suggest a weakening Bitcoin market. CryptoQuant contributor Darkfost noted a sharp decline in Bitcoin demand since December. He highlighted a drop in the 30-day simple moving average of apparent demand, which compares new supply to BTC inactive for over a year. This decline indicates fewer active buyers and a more cautious market.
Data analytics platform Alphractal revealed another concerning trend on March 12. The Bitcoin Sharpe Ratio, which measures risk-adjusted returns, has been declining since March 2024. This decline suggests increasing risk per unit of return, even as Bitcoin hit all-time highs above $100,000.
The decreasing Sharpe Ratio can be attributed to macroeconomic uncertainty, increased volatility, and slowing short-term returns. When the Sharpe Ratio declines, returns become less predictable and more volatile, indicating increased market volatility and possible price corrections.
Santiment’s data also indicates that large Bitcoin holders are selling. In the past week, whale wallets, or those with 100-1,000 BTC, sold over 50,000 BTC totaling approximately $4.07 billion. Changes in whale and shark wallet tiers have historically affected market trends, raising more questions about the short-term prospects of Bitcoin.