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Bitcoin ETFs Slow: BlackRock’s IBIT Streak Ends, Fidelity Sees Outflows

This week witnessed a notable shift in the momentum of two of the most successful exchange-traded fund launches in history. BlackRock’s (NYSE:BLK)spot Bitcoin ETF, IBIT, renowned for its remarkable performance, experienced zero inflows on Wednesday and Thursday, marking the end of its 71-day streak of fresh investments totaling approximately $17.24 billion in assets under management since its trading approval on January 11. Additionally, Fidelity’s FBTC, the current runner-up in the ETF race, reported losses of $22.6 million on Thursday, marking its first reported outflow and reducing its assets under management to around $9.9 billion, according to CoinGlass data.

The waning interest in the leading Bitcoin ETFs, excluding Grayscale’s GBTC, serves as a significant indicator of the cryptocurrency market’s recent cooling and suggests that the initial ETF frenzy, which propelled Bitcoin to new heights, has subsided. With Bitcoin currently trading around $63,500, down approximately 12% from its all-time high of $73,000 in March, only one of the 10 trading spot Bitcoin ETFs, Franklin Templeton’s EZBC, reported inflows on Thursday.

Disappointing inflation data has tempered hopes for Federal Reserve interest rate cuts, and the prospect of higher borrowing costs typically diminishes the market’s appetite for riskier, more volatile investments like crypto. Meanwhile, Bitcoin has remained relatively stagnant since early March, partly reflecting ETF stagnation and the anticipation surrounding the network’s recent “halving” event on April 19, as investors adhered to the “buy the rumor, sell the news” strategy, liquidating their holdings.

Nate Geraci, president of the ETF Store, noted that ETF flows often mirror the performance of the underlying asset, suggesting that a pause in Bitcoin’s price may lead to a temporary hiatus in inflows. However, Geraci emphasized that these products are still in the early stages of adoption, with many large institutions yet to permit their brokers to solicit purchases of spot Bitcoin ETFs, and registered investment advisors cautiously entering the category.

Despite the recent slowdown, these funds are widely regarded as a resounding success, accumulating over $54 billion in assets in just over three months of trading, thereby integrating Bitcoin-tracked assets into the portfolios of millions of mainstream investors.

Highlighting their success, Hong Kong’s Securities and Futures Commission recently granted approvals for three spot Bitcoin and Ether ETFs, set to commence trading on Tuesday, with additional countries expected to follow suit. Issuer Harvest is waiving a management fee for its funds, sparking expectations of a fee war akin to the heated competition in the U.S., where Grayscale introduced a Bitcoin Mini Trust with ultra-low fees of 0.15% in an effort to capture some of the outflows from GBTC, which charges 1.5%.

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