(Bloomberg) – Investors yank more than $1 billion from spot Bitcoin exchange sales funds on Tuesday, marking the largest day-to-day outflow since the cohort’s debut last January.
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According to data compiled by Bloomberg, the Fidelity Wise Origin Bitcoin Fund (Ticker FBTC) posted the most sudden outflow of these funds, followed by the iShares Bitcoin Trust ETF (IBIT). It is because Bitcoin prices are unstable, and investors are avoiding riskier assets in the face of uncertainty. As a group, Bitcoin funds have dumped about $2.1 billion for six consecutive days. This is the longest leak since last June.
This week, the world’s biggest digital assets are under pressure this week, with prices sinking to their lowest levels since mid-November after hitting an all-time high earlier this year. Other cryptocurrencies have also been sliding, with the index tracking top digital tokens at a pace, the largest four-day drop since early August.
Bitcoin funds are looking at Exodus, but investors have used recent stock sales to add nearly $7 billion in one session to the Investors’ QQQ Trust (QQQ) and SPDR S&P 500 ETF Trust (SPY).
“Despite the institutional flows over the past 12 months, digital assets are still highly retail flow-driven,” said Geoff Kendrick, global head of digital asset research at Standard Chartered. “This sets them apart from stocks and bonds. In my opinion, this means that the average hand is weaker or there are fewer pockets of losing and losing, so there’s likely to be more pain.”
Kendrick predicts Bitcoin will trade even lower (around $80,000 range).
For Matthew Sigel, head of Vanek’s digital asset research, the record-breaking outflow can be attributed to hedge funds that unleash a common trading strategy called base trading, which exploits differences in price between spots and futures markets. Some use ETFs to benefit from cryptocurrency volatility or offset the short positions of derivatives.
“This strategy involves purchasing a Bitcoin spot (via ETF), while also shortening Bitcoin futures and locking in low risk returns,” Sigel says. “However, the profits from this trade have recently collapsed and are not attractive. As a result, hedge funds that used ETFs for this strategy are likely to close their position, leading to significant redemption.”
