Bitcoin dipped below US$65,000 for the first time in over a month on Tuesday, coinciding with a significant outflow from digital asset investment products which suffered a setback totalling US$600 million, the largest since mid-March.
The latest data from CoinShares shows that these outflows, and recent price sell-offs, saw total assets under management fall from above US$100 billion to US$94 billion in the space of a week.
Outflows were mostly made up of bitcoin, which saw a loss of US$621 million.
CoinShares speculated that a more-than-expected hawkish Federal Reserve – which opted to hold interest rates this month – prompted investors to scale back their exposure to fixed-supply assets, like bitcoin.
But bitcoin has been front of mind for local investors in recent weeks for another reason, namely, Australia’s growing market of crypto asset ETFs has continued to evolve, with VanEck announcing this week the launch of its own product on the ASX, which will be the exchange’s first such ETF.
As such, bitcoin’s price movements have raised concerns regarding the potential spillover impact on these investment products.
But Marc Jocum, product and investment strategist at Global X ETFs, doesn’t anticipate global outflows from bitcoin to have a significant impact on Australian investors. He did, however, admit that bitcoin ETFs have not been 100 per cent immune to the broader sell-off in crypto markets over the past week.
“Bitcoin outflows last week could be attributed to several factors,” Jocum told InvestorDaily.
One of these being that a hawkish stance from the Fed has led to more caution among investors who have scaled back their expectations for rate cuts. Moreover, he noted that a defensive portfolio shift may be in play towards risk-off assets such as gold.
“Additionally, traders utilising the ETF wrapper may be contributing to the outflows following bitcoin’s recent price decline,” Jocum said.
“It’s also important to recognise that some investors may be locking in short-term profits after bitcoin surged by approximately 40 per cent since the launch of US spot bitcoin ETFs,” he added.
But despite these flow fluctuations, Jocum highlighted the growing cohort of buy-and-hold bitcoin investors, with bitcoin ETFs being increasingly viewed as a strategic tool for long-term portfolio allocation.
“While short-term flows can change based on prevailing market sentiment and macroeconomic catalysts, the long-term trend, particularly with bitcoin ETFs, has been one of sustained growth.”
AMP chief economist Shane Oliver agreed, noting that he similarly doesn’t foresee the most recent bitcoin outflows having a “huge impact” on the ETF market.
“This is a very volatile asset class. It doesn’t necessarily mean that the arrival of crypto ETFs in Australia will be a failure or anything like that,” Oliver said.
Looking at the bigger picture, he conceded that bitcoin has, overall, struggled to get through recent highs after its most recent rally in March.
“That could just be a consolidation, but we haven’t seen the sort of follow through that you might have expected given the halving this year … so the market moved up in anticipation of that but we haven’t seen the decisive triumph through the prior highs of 2021 and that could be a bit of a damper.
“But I suspect if you look at that outflow data, it is very volatile week-to-week, inflow and outflow. I think that’s the nature of the asset class,” Oliver concluded.
Bitcoin experienced substantial price gains following the 2012 and 2016 halving events, lifting by 284 per cent and 559 per cent, respectively. As such, the asset’s price gains in March were largely attributed to the anticipation surrounding the upcoming halving.
However, the asset failed to impress, with no rally reported since the halving took place.
“The theory was that [bitcoin] would break higher, helped along by the halving. But so far, that hasn’t occurred,” Oliver said.
“Given all the talk around it, with the ETFs, some may be disappointed that it hasn’t pushed on harder.”
