Bitcoin ETFs see largest outflow in six weeks as token stagnates

[NEW YORK] Spot Bitcoin exchange-traded funds recorded their largest outflows last week since the end of June, reversing a strong start to August.

The 13 US-listed funds saw a net US$389.7 million drained in the week of Aug 10, after pulling in US$853.5 million the previous week, according to data compiled by Bloomberg. The first week of the month marked the largest weekly inflows for the funds since April, coming on the heels of a rare hack of a brand of so-called cold wallets that renewed interest in safeguarding digital assets through traditional finance.

“Last week’s ETF net outflows reflect the subdued mood in the Bitcoin market,” said Esme Pau, head of capital markets and policy at blockchain security firm CertiK. “The inflows seen shortly after the Coldcard hack now appear to have been an aberration, with broader institutional sentiment remaining cautious, bordering on pessimistic.”

The renewed selling of ETFs comes as Bitcoin languishes around US$63,000, down some 50 per cent from its record high reached in October last year. The risk of higher interest rates is keeping sentiment cautious while a lack of legislative progress in the US on the proposed Clarity Act, a crypto market structure Bill, is also pushing buyers to the sidelines.

Flows into Bitcoin ETFs, which offer exposure to Bitcoin’s price without requiring investors to hold or secure the tokens themselves, were marginally positive for three weeks last month, but underlying sentiment remained fragile.

After a recent hack of Coldcard-branded offline wallets made by Toronto-based Coinkite, some saw a stronger case for gaining exposure to Bitcoin through more traditional assets. A vulnerability that made the generation of Coldcard keys predictable shook faith in a type of wallet meant to be one of the safest places for investors to secure their crypto.

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Bitcoin’s price was largely stagnant last week, staying within a tight 2 per cent range. It was trading at around US$63,400 at 1:30 pm in Singapore.

The Bitcoin implied volatility index, which uses options prices to anticipate 30-day swings in the token, was around 37 on Monday, below its average for the year and well under its 82.2 peak in early February.

ETF flows are an important gauge of institutional demand because the products have emerged as one of the biggest channels through which traditional investors gain exposure to Bitcoin. A sustained period of outflows could therefore weigh on prices and liquidity, particularly if other large sources of demand remain subdued. BLOOMBERG