- Bitcoin tracking products posted inflows of over $226M last week, the third week in a row the crypto asset has commanded institutional inflows.
- The SEC is considering approving up to four Bitcoin futures-based ETFs this month, raising onlookers’ hopefulness.
As Bitcoin (BTC) rises to levels last seen five months ago, institutional investors continue to pour in funds to the digital asset’s tracking products. An Oct. 12 CoinShares report – Digital Asset Fund Flows Weekly – shows that institutional BTC products experienced inflows of over $226 million.
Notably, last week was the third time Bitcoin products dominated weekly crypto product inflows, with a 227 percent week-over-week increase. The crypto asset has also registered inflows for four weeks straight. The huge inflows occurred in tandem with BTC’s 12.5 percent weekly price gain, where it was trading at around $54,000 on Friday, Oct. 8, per our data.
Additionally, heightened demand for BTC products has seen the combined assets under management (AUM), of institutional crypto products surge. In just a week, combined AUM rose to $66.7 billion, which CoinShares says is just 5 percent shy of the sector’s record May by AUM.
Bitcoin seizes most institutional inflows
Recently, US Securities and Exchange Commission Chairman, Gary Gensler, made statements of a possible approval of the US’ first Bitcoin exchange-traded fund (ETF). CoinShares attributes Bitcoin’s bullish sentiments to high anticipation of a crypto ETF this month after the years-long battle for the same.
Presently, the SEC is mulling over four BTC-ETF applications based on the regulated futures contracts of Chicago Mercantile Exchange (CME). Already, the financial watchdog has approved the first Volt Bitcoin ETF on the New York Stock Exchange (NYSE). A futures-backed crypto ETF, if not a traditional spot-based product, would give digital asset space players a break into the $6T ETF industry.
As for altcoins, investors expressed mixed desires last week. Funds offering exposure to Solana (SOL) and Cardano (ADA) saw inflows of $12.5 million and $3 million, respectively. However, products tracking Ether (ETH), Polkadot (DOT), and Ripple (XRP) bore outflows of $13.6 million, $2.1 million, and $600,000 each. Generally, crypto investment products have posted inflows for the eighth week in a row.
Critics such as macro analyst Alex Krüger explain that crypto ETFs could ultimately bring more harm than good:
Futures are usually in strong contango (i.e. futures > spot), so at rollover, the ETF would *sell low to buy high*, and suffer Contango Bleed. Assets with strong contango bleed trend lower.
According to him, spot-based ETFs would be the more attractive option as they carry a lesser risk. Another analyst, Willy Woo, highlighted the pros and cons of each type of offering:
I think the best thing about ETFs apart from their initial reach is the potential to stem BTC’s unit bias problem.
The long term negatives:
Spot ETFs – increased sell pressure from fees.
Futures ETFs – potential for price suppression and more volatility due to futures dominance.