- Investment products tracking Bitcoin have dominated inflows to crypto investment products for the second week in a row.
- Altcoins saw both inflows and outflows, with Solana tracking products plunging by 98 percent from five weeks ago.
For eight consecutive weeks until early September, Bitcoin (BTC) investment products experienced a persistent record of outflows. Altcoins such as Solana (SOL) dominated weekly inflows to crypto tracking products. However, the ‘digital gold’ has reclaimed this position, now posting its third consecutive week of inflows.
Between Sept. 27 and Oct. 1, BTC investment products saw $68.7 million worth of inflows. This was a 36 percent surge in exposure week-over-week, according to CoinShares latest report: Digital Asset Fund Flows Weekly. Last week now marks the second week in a row that BTC tracking products have dominated inflows to digital asset products.
In total, digital asset investment products generated $90 million in inflows last week. The week marks the seventh consecutive week of inflows and bullish sentiments as investors continue to increase their crypto exposure.
After Bitcoin investment products, investors’ second-best was Ethereum (ETH), with inflows of $20.2 million. BTC and ETH products gained roughly 7.4 percent and 3.2 percent respectively for the week.
Bitcoin tracking products exceed altcoins by leaps and bounds
Other altcoins posted mixed investor appetite last week. Products tracking Cardano (ADA), and Solana (SOL) posted inflows of $1.1 million and $700,000 respectively. Solana seems to have had a downswing in investor demand as products tracking SOL crashed by 98 percent since posting highs of $38.9 million five weeks ago. Multi-asset funds also saw minimal inflows of $1.9 million. Polkadot (DOT) and Binance Coin (BNB), on the other hand, shaved off $800,000 each.
Notably, crypto markets have been recovering from July’s violent recession. Bitcoin itself was trading at $49,456 at writing time as per our data. The digital asset has recovered from its July low of $29,000 but is still about 24 percent shy of its April all-time high of $65,000.
Last week, institutional crypto products traded hit the $2.4 billion mark. However, CoinShares highlights that this value is still low in comparison to the $8.4 billion traded weekly during the peak of 2021’s bull cycle in mid-May.
As for institutional asset managers, CoinShares estimates that they currently represent combined assets under management (AUM) of $57.1 billion. This represents a weekly increase of 8.5 percent. Grayscale, still dominated the sector with $41.1 billion or 71 percent of the total AUM. Meanwhile, CoinShares XBT and Purpose funds came in second and third with $2.2 billion and $2.1 billion worth of AUM respectively.
Grayscale has now expanded the digital assets in its investment portfolio to include Solana (SOL). The firm also increased its fund division to Uniswap (UNI) tracking instruments. Moreover, many analysts including the popular PlanB predict better closing prices for Bitcoin and Ethereum in the coming months. All this points to rising anticipation for enormous returns, spiking greater interest in institutions.
First Bitcoin ETF in Immediate Danger of Hitting Cap on Contracts Held
The first bitcoin (BTC) futures-backed exchange-traded fund (ETF), ProShares’ BITO, is reportedly already in danger of breaching a limit on the number of futures contracts it is allowed to hold under current Chicago Mercantile Exchange (CME) rules.
BITO already owns nearly 1,900 bitcoin futures contracts expiring in October, according to Bloomberg data. The number is close to CME’s current rule that a single entity cannot own more than 2,000 front-month futures contracts, Bloomberg reported on Thursday, when BITO had only been live for two full days.
To get around the limit, the ETF has reportedly started buying futures contracts expiring in November in addition to the October contracts it holds, with 1,400 November contracts amassed so far. At the current pace, however, the fund could also soon reach CME’s cap on holdings for next-month contracts of 5,000 contracts, per the report.
And while the CME has already said it will increase the limits to 4,000 front-month contracts starting in November, this is also likely to be reached soon by BITO, which already has more than USD 1bn under management.
A major issue faced by ProShares’ ETF is that futures contracts tend to trade at a higher premium over spot prices the further away their expiry date is – a phenomenon known as contango in the futures market.
As such, choosing to get around the maximum limits by buying longer-dated contracts will mean the ETF has to get its bitcoin exposure at prices that are increasingly higher than spot. This could result in high costs when contracts are rolled over at expiry that will eventually be paid by the ETFs investors in the form of lower returns.
According to Bloomberg’s own ETF expert, Eric Balchunas, some of the pressure on the first ETF to be launched could be alleviated by competing ETFs coming to the market over the next few days and weeks. However, the first-mover advantage that BITO has gotten will still be difficult to challenge, he said.
“The unprecedented early volume in BITO makes it like a snowball rolling downhill, as liquidity and assets begets more liquidity and assets,” Balchunas said, adding that it will be “nearly impossible” for other ETFs to steal significant volume from BITO in the short or medium-term.
Commenting on the possibility of the ETF running into the ceiling, some speculated that the extreme popularity of the futures ETF could eventually pressure the US Securities and Exchange Commission (SEC) to allow a “physically” backed spot bitcoin to launch.
That scenario was suggested by Zhu Su, CEO of crypto hedge fund Three Arrows Capital, saying that it could lead to the ETF rising to a “hilarious premium,” leading the SEC to “approve a spot ETF because of public outrage.”
In a tweet, he also shared a comment from Max Boonen, Founder of electronic market maker B2C2, saying that it is “doubtful” that clearing houses will be comfortable with a single entity holding more than 4,000 front-month contracts.
“What happens when BITO surpasses 4k [contracts] as it surely will?”, Boonen asked.
So what if BITO halts creations bc hits CME OI limit, BITO spikes to hilarious prem, SEC rushes to approve spot ETF bc of public outrage, btc $1m, wyd https://t.co/1c5mRlg46j— Zhu Su 🔺 (@zhusu) October 21, 2021
A similar idea was also suggested by Eric Balchunas, saying in the Bloomberg report that BITO hitting the limits on how many futures contracts it is allowed to hold could pressure the SEC to allow a spot-based bitcoin ETF.
“That certainly would do the trick in slowing down BITO and providing a release valve for futures demand,” the senior ETF analyst said.
Meanwhile, the second bitcoin ETF to be approved by the SEC, the Valkyrie Bitcoin Strategy ETF with the ticker BTF, is scheduled to go live on the market today, October 22. BTF will also be backed by bitcoin futures contracts traded on the CME rather than by “physical” bitcoins.
BTF should go live on the Nasdaq exchange when the market opens at 09:30 ET (13:30 UTC).
Following the launch of Valkyrie’s fund today, a third bitcoin futures ETF, the VanEck Bitcoin Strategy ETF (XBTF), is set to go live on Monday on the Cboe BZX Exchange, according to a recent SEC filing.
Second US Bitcoin Futures ETF Launching Today – Here Are the Details
A new Bitcoin (BTC) futures exchange-traded fund (ETFs) rolls out today.
Valkyrie Investments, an alternative asset management firm, is launching the country’s second Bitcoin futures ETF, according to CEO Leah Wald.
The new product is called the Valkyrie Bitcoin Strategy ETF and will trade on the Nasdaq under the ticker symbol BTF.
The launch comes on the heels of ProShares’ Bitcoin futures exchange-traded fund, which exploded onto the market on Tuesday with the second-biggest ETF launch of all time.
Like ProShares’ Bitcoin Strategy ETF (BITO), the Valkyrie ETF doesn’t invest directly in BTC but provides price exposure to Bitcoin futures contracts.
Per the ETF’s prospectus,
“Under normal circumstances, the fund will seek to purchase a number of Bitcoin futures contracts so that the total notional value… of the Bitcoin underlying the futures contracts held by the fund is as close to 100% of the net assets of the fund as possible.”
Bitcoin is trading at $62,793, up nearly 10% on the week but down from its Wednesday all-time high of $67,276, according to CoinGecko.
Bears Gearing up to Drag Bitcoin Down, This Is How BTC Price Can Defend Itself!
The cryptocurrency market remains vivid lately. While some flourish, others lose out-breath on their run. The market cap of the crypto space at the press time, is down by 1.7%, at $2,718,182,571,073. While the volume for the last 24-hours hovers around ~$166,723,949,932.
The star crypto at press time is trading at $63,624.08. With negative gains of 2.5% for the last 24-hours. While the market capitalization of BTC floats around $1,199,369,171,403. The trading volume for round-the-clock stood at around $44,244,433. The dominance stands at around 44.1%. The coin has been consolidating post-brushing its new ATH at $67,276.79, which was on the 20th of October.
Bitcoin to Lose Its $60,000 Levels?
According to an analyst, BTC grew from $41,000 to $67,000, without any notable corrections. From the chart, BTC price can be seen moving across the rising channel. The star coin had earlier rebounded each time it hit the support levels of the rising channel. However, this time around the coin broke through its support levels. And now holds two probabilities for its price action.
The analyst anticipates the coin to either retest and plummet towards its support levels. Or it might take a dip straight away towards its support level at $59,000. However, the analyst expects BTC to march towards its milestone in the range of $78,000 to $80,000. Following the price correction. But in no terms, it means a bear trap.
Collectively, a price correction seems to be imminent, prior to a major leg-up. As a lot FOMO has also crept in during the uptrend. Which might need correction, for a healthy run in the quarter. Hopefully, the star coin retraces, its path surpassing the expectations.