Bitcoin is heading towards its worst month yet. $3.5 billion has already disappeared from ETF funds.
The largest player on the market, BlackRock's IBIT fund, was hit the hardest. This ETF, which is responsible for approx. 60 percent assets invested in American spot bitcoin funds, recorded outflows of $2.2 billion in November.
If the trend does not reverse in the last days of the month, this will be by far the worst period in the product's short history. For many investors, this is a signal that the enthusiasm from the beginning of the year, when Bitcoin ETFs broke records of inflows, has completely evaporated.
Bitcoin from an ETF? There were profits, there are losses
Capital outflows from funds go hand in hand with the weakness of bitcoin itself. The price of the most popular cryptocurrency fell to around 80.5 thousand on Friday. dollars, to later partially make up for the losses and on Monday morning (New York time) oscillate around 86,000. hole. Despite a slight rebound, bitcoin is still around 6-8%. in the red since the beginning of the year, and November promises to be its worst month since the crisis of 2022, when the market experienced a series of spectacular bankruptcies, culminating in the collapse of Sam Bankman-Fried's FTX exchange.
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Since their debut in January 2024, spot Bitcoin ETFs have become to the cryptocurrency market what index funds are to the broader stock market – a simple and massive channel for capital flow. They largely determine the mood around cryptocurrencies today. However, this mechanism works both ways. When prices rise, inflows to funds accelerate and further fuel growth. When the market turns, investors sell their units and outflows deepen declines.
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Citi Research shows how strong this feedback effect is. According to analysts' calculations, every $1 billion withdrawn from Bitcoin ETF funds translates into an average of approximately 3.4%. cryptocurrency price drop. The same mechanism also works on the inflow side. Citi points out that assuming no new money in “bear” funds, the end-of-year scenario assumes a drop in the price even to around PLN 82,000. hole. Meanwhile, instead of stagnation, billions of dollars have already flowed out of ETFs in recent weeks, which increases the risk of further depreciation.
Changes not only in ETFs
However, market sentiment is influenced not only by the valuation of bitcoin itself, but also by the behavior of institutional investors and hedge funds, which have widely used ETFs for more complex strategies in recent months. As Rebecca Sin, senior ETF analyst at Bloomberg Intelligence, points out, some of the current outflows may be due to the winding down of the popular strategy basis tradewhich involves playing on the price difference between the spot market and futures contracts.
ETFs were also used to make money on the high volatility of cryptocurrency and as an element of hedging short positions on derivatives. As market nervousness increases and gold strengthens, some of these positions are closed, which generates an additional supply of ETF units.
On Friday, bitcoin funds recorded record turnover – a total of their units were traded for $11.5 billion. Of this amount, as much as USD 8 billion. was due to IBIT. Despite such high investor activity, the day ended with an outflow of USD 122 million for the market leader. For some observers, this is a signal that although interest is still high, the structure of demand is changing, and some institutions are limiting their exposure to a category that until recently was considered the king among cryptocurrency exchange products. BlackRock has not yet commented on the scale of the outflows.
The weakness of Bitcoin ETFs is not an isolated phenomenonbut it is part of a broader correction in the riskiest assets. In recent weeks, the prices of companies exposed to artificial intelligence, the so-called meme stocks and shares that were previously growing on speculative momentum. The S&P 500 itself is on track for its worst month since March, and the short-term correlation between bitcoin and tech giant stocks is at all-time highs.
As Raphael Thuin, head of capital markets strategy at Tikehau Capital, explains, there is a growing narrative of a possible revaluation in the technology and artificial intelligence market.
Thuin points out that the current situation is a phase of consolidation after a period of very strong growth and capital inflows. Such consolidation means rotation in positioning. Some investors realize profits and exit the market, others enter, hoping for a price drop. However, this increases the sensitivity of prices to new information and the risk of losses for those who enter the market too late or too aggressively.
For now, everything seems to indicate that November will be remembered as the month of capital withdrawal from Bitcoin ETFs and testing the market's resilience to the outflow of money that, just a few months ago, was building the narrative of a new era of cryptocurrencies in mainstream finance.
Bitcoin has been at a loss of -6.15% since the beginning of the year. at the time of publication of the article.
