ETF flows are down but don’t signal investor panic

of bitcoin The steep decline from a record price of over $126,000 last October has tarnished sentiment across the crypto landscape. Confidence has been shaken in a trade that was once seen as a digital rival to gold as a store of value, and by some others as a risk asset that will continue to rise even further under the crypto-friendly Trump administration.

Since hitting an all-time high last October, Bitcoin has lost nearly half its value and its inability to bounce back in trading is raising fears about another “crypto winter” – a prolonged recession similar to the time of the FTX crash in 2022 when Bitcoin fell from near $50,000 to as low as $15,000. In the last month alone, Bitcoin has fallen by more than 25%.

But crypto investment experts on the latest CNBC “ETF Edge” say a look at recent flows into Bitcoin and crypto exchange-traded funds shows that long-term investors are not abandoning the asset class. Money has certainly moved out, but he says it has not been to a level that would prompt long-term investors to panic.

In the last three months, iShares Bitcoin Trust (IBIT) A net outflow of about $2.8 billion was observed. That’s substantial, but according to Vettafy, in the last year, BlackRock ETFs have attracted net inflows of nearly $21 billion. The broader Spot Bitcoin ETF category shows a similar pattern. Over the past three months, the ETF asset class has seen net outflows of approximately $5.8 billion. Over the past year, across all spot Bitcoin ETFs, net inflows were a positive $14.2 billion. Money is moving out, but most assets remain in place, and some ETF experts say the money being taken out is not from long-term investors or financial advisors who have begun allocating to the asset class.

“It’s not ETF investors who are driving the selloff,” Bitwise Asset Management CIO Matt Haugen said on “ETF Edge.”

He says much of the broader pressure in Bitcoin may come from crypto investors who have accumulated positions over several years and are now reducing risk. “It’s really a story of two sides,” Hogan said. He also said hedge funds and short-term traders are the ones who use the most liquid ETFs as instruments and can quickly pull capital when momentum turns negative.

At CNBC’s Digital Finance Forum last week, Galaxy CEO Mike Novogratz said the crypto market’s “era of speculation” may be coming to an end, and returns going forward will be more like long-term investment holdings. “This is going to be a real-world asset with very low returns,” he said at a CNBC event in New York City last Tuesday. “Retail people don’t get into crypto because they want to make 11% a year,” he said. “They get into it because they want to make 30 one, eight one, 10 one.”

Financial advisors at Wall Street banks are among those adding Bitcoin to investor portfolios and adding their own branded crypto ETFs. And long-term investors who hold crypto as a small allocation within a diversified portfolio may be willing to ride out the volatility, Hogan said. If investors were capitulating across the board, the outflows over the last three months would probably be closer to the scale of inflows over the last 12 months.

Not that ETF asset flow analysis makes any period easy for the recent crypto investor to stomach. “It’s hard to be a Bitcoin investor right now,” Will Rhind, founder and CEO of ETF company GraniteShares, said on “ETF Edge.” He added that the performance of other “harder” assets, such as SleepHas further increased the Bitcoin crisis. For investors who have supported the “digital gold” concept, the decline in Bitcoin’s price has been troubling. “This should not be happening,” he said of a time when other safe-haven assets are performing strongly and Bitcoin continues to decline. With Bitcoin going down almost 50%, “gold shouldn’t go to all-time highs,” he said.

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