Bitcoin ETF filing clashes with cooling demand for funds

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    (Bloomberg) – Gary Gensler, chairman of the US Securities and Exchange Commission, sparked a new wave of optimism among proponents of Bitcoin exchange-traded funds this month – but it’s unclear whether investors share that enthusiasm.

    Digital asset investment products from Grayscale, Bitwise, 21Shares and others saw outflows for the fifth straight week, the longest such streak since January 2018, according to data compiled by CoinShares. The outflows over this route amount to around 93 million US dollars. Much of this is due to the fact that money is being pulled away from Bitcoin products, according to the digital asset manager.

    The cooling appetite contrasts with the growing pile of cryptocurrency ETF filings, with at least 18 filings ending up with the SEC this year. That number grew by three in the past two weeks after Gensler signaled that regulators may be more open to a Bitcoin ETF if it’s based on futures rather than the cryptocurrency itself. But even if the SEC finally gives the fund structure the green light, according to Coinshares’ Meltem Demirors, it’s not a safe bet that a Bitcoin ETF would meet with huge demand.

    “There are so many places for people to buy and sell bitcoin, to invest bitcoin in tax managed accounts,” said Demirors, chief strategy officer at CoinShares. “We’re not sure what the demand will be as the maturity of crypto in the US is already pretty high.”

    After reaching an all-time high of nearly $ 65,000 in April, Bitcoin resumed its volatile price fluctuations. The world’s largest cryptocurrency fell below $ 30,000 in June as environmental and regulatory issues weighed on sentiment. Bitcoin has since rebounded to more than $ 46,000, despite the U.S. Senate passing an infrastructure bill that would allow for extensive oversight of virtual currencies.

    However, the flow of funds has yet to keep pace with the recovery. Bitcoin funds and futures are on track for the third month in a row with outflows, according to Bloomberg Intelligence, the longest series of data dating back to 2014. Most of this decline is due to decreasing open positions in Bitcoin futures, which means traders are letting their contracts roll without renewal.

    The outflows could be even greater if the $ 30 billion Grayscale Bitcoin Trust (ticker GBTC) – the largest crypto fund – doesn’t allow shares to be redeemed. That’s after shares of trust rose hundreds of millions earlier this year amid the crypto craze. As a result, GBTC has been trading at a sustained discount to its underlying Bitcoin since March.

    Still, in the eyes of Bloomberg Intelligence’s James Seyffart, it’s only a matter of time before investors start flowing into crypto funds again.

    “I think there is still demand for bitcoin products that people can access on the traditional rails of the financial system, if you will,” Seyffart said. “Flows tend to follow performance in areas and products like this, so I wouldn’t be surprised if those flow numbers were potentially reversed in the last few weeks of Bitcoin’s performance.”

    – With the support of Vildana Hajric.

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