Crypto Market Remains Focused on Spot Bitcoin ETF Flows Over Fundamentals

Posted on 25 March 2024

  • Spot bitcoin ETFs recorded their first week of net outflows.
  • Outflows from the Grayscale Bitcoin Trust reached $1.83 billion over 4 days, Coinbase noted.
  • Selling pressure may have come from the bankruptcy estate of Genesis Global, the report said.

The cryptocurrency market remains fixated on spot bitcoin (BTC) exchange-traded fund (ETF) flows rather than fundamentals, as the recently approved products saw their first week of net outflows in two months, Coinbase (COIN) said in a research report on Friday.

Coinbase noted that net outflows amounted to $836 million between March 18 and March 21. Bitcoin slipped below $63,000 last week as the outflows sped up. It was recently trading at around $66,800.

There is little insight into what drove the surge in outflows from the Grayscale Bitcoin Trust (GBTC), which reached $1.83 billion in total over four days, the report said.

In previous weeks, positive inflows into other spot ETFs more than offset outflows from GBTC, suggesting “some capital rotation at that time,” analysts David Duong and David Han wrote. GBTC charges higher fees than the other funds.

One source of potential selling pressure that has been expected is from the bankruptcy estate of Genesis Global, amounting to the sale of 35.9 million GBTC shares, Coinbase said.

This is separate from the 30.9 million shares Genesis pledged in collateral to borrow $1.2 billion from Gemini Earn users in the third quarter of 2022, the report noted. Gemini has settled with Genesis to return those assets in kind and payment is expected in a few weeks, following court approval.

Coinbase said it's not clear whether the recent GBTC outflows are linked to these sales, and that “we can only infer that the size and scope of the change in GBTC shares outstanding coincide with recent developments on Genesis’ payment obligations.”

“More importantly, given that the majority of creditor payments will be made in crypto and not cash, the market effect on bitcoin performance should eventually be net neutral,” the report added.