🟣 Bitcoin ETF flows in focus

The post-ETF launch sell-off seems to have run its course, for now, as bitcoin volatility has been relatively muted so far this week

January 17, 2024

A week on from the historic ETF approval and bitcoin is back in a range where it spent much of December, consolidating between about $41,700 and $43,500.

Both bitcoin and ether are down between 1-2% over the past 24 hours in Wednesday morning trading, amid a rising dollar and falling equities markets.

In the short term, there’s a bit of a tug of war between investors fleeing the relatively expensive GBTC — registering outflows — and the new cheap ETF offerings from BlackRock, Fidelity, and the like which are seeing record inflows.

The trend, however, is broadly positive for bitcoin.

CoinShares research head James Butterfill puts GBTC and BITO (a futures-based ETF) combined outflows since the spot bitcoin ETFs launched at about $1.32 billion following Tuesday’s closing bell, while the newly issued spot ETFs have attracted $2 billion in inflows in aggregate.

Bloomberg analyst Eric Balchunas concurs that the new ETFs “more than offset” the GBTC exit with their $782 million net inflows.

Ethereum core devs launched the Dencun hard fork on the first of three major testnets, Goerli, but it got off to a rocky start, causing a chain split. The Prysm consensus client developers hastily fixed a bug and things were back on track a few hours later. That’s what testnets are for!

Solana’s SOL is bucking the majors’ trend, up over 3% following Tuesdays’ details of the impending Jupiter Exchange (JUP) airdrop slated for Jan. 31, and the announcement of an as-yet unspecified “Saga Chapter 2” device, which may or may not be a phone.

On a macro scale, the talk is that markets have been overestimating the Federal Reserve’s appetite to cut interest rates at its March meeting. 

FOMC member Christopher Waller noted, in a speech at the Brookings Institution this week, that the US is "within striking distance" of the Fed’s 2% inflation goal, but implied policymakers were nevertheless in no rush to cut rates until it’s clear that lower inflation is here to stay.

That may not matter for crypto and gold, however, according to Michael J. Howell, CEO of CrossBorder Capital, who projects that global liquidity will continue rising, even as the Fed balance sheet trends lower.

Howell told Blockworks Macro’s Jack Farley that over 60% of global economies are now in a period of “rebound” or “calm” which is bullish for tech and financial sectors now, and commodities later.

There’s one abnormal sign in the markets coming from bond markets, specifically US Treasurys, Howell explained.

“The monetary authorities are interfering with the market — distorting the normal pricing mechanism — and we call that ‘not QE’ QE and ‘not yield curve control’ yield curve control. There’s a lot of manipulation which is going on,” he said.

GBTC outflows are massive:

GBTC discount to NAV (top) and outflows (bottom)

Bloomberg’s Eric Balchunas was agog at the extent of the Grayscale exodus, but on the plus side, the famous “GBTC discount” is heading for extinction.

“There's no denying the $GBTC Gouge is big and ugly (def gonna need stitches),” Balchunas posted to X. “Bottom chart gonna be red for a while but good news is that the % discount is shrinking, the closer the two lines at top get to each the less pressure inside the ETF of ppl wanting to get out.”

Coinbase vs. SEC

Coinbase is going toe to toe with the SEC today in a New York courtroom.

“Legal experts and crypto fans say the exchange has a solid chance at getting its way,” writes Casey Wagner.

It’s unlikely — but not impossible — that we’ll get a ruling today, but otherwise it could be weeks or months of anticipation and uncertainty.

Bitcoin and the debt endgame

The latest episode of On the Margin features Jonah van Bourg discussing:

  • Trading commodities and crypto 

  • The US debt end game

  • Bitcoin ETF launches

Tether has the money

Cantor Fitzgerald CEO Howard Lutnick sang the praises of USDT stablecoin issuer Tether during a video interview at the Davos conference Tuesday. 

“From what we’ve seen — and we did a lot of work — they have the money they say they have...There has always been a lot of talk [about] ‘Do they have it or not? So I’m with you guys saying we’ve seen it, and they have it.”

The world’s largest asset manager has so far edged fellow financial giant Fidelity and crypto-focused firm Bitwise.

The ETF approvals come as the SEC pursues a multi-front strategy of crypto oversight and rule-changing.

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.