The mystery surrounds the outflow of $ 500 million from the Bitcoin ETF

The mystery surrounds the outflow of $ 500 million from the Bitcoin ETF

(Bloomberg) – North America’s first traded Bitcoin fund is at the heart of a cryptocurrency speculation game after seeing a record $ 500 million overnight outflow last week.

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Withdrawals from the Purpose Bitcoin ETF (ticker BTCC) equated to about 24,510 Bitcoin, or about 51% of its managed asset on Friday, according to data compiled by Bloomberg and analysts.

“Obviously, this was more of an outflow in this case and, to me, this is more of a reflection of investors’ views on the market,” said Vlad Tasevski, CEO of Purpose Investments. He added that the company does not have direct visibility as to who makes the transactions given the way the ETF structure works. “Even if we knew, we usually do not comment on what our customers do.”

The sale came as the cryptocurrency market went through a strong selloff that continued over the weekend. Bitcoin fell as much as 15% to $ 17,599 on Saturday, the lowest level since late 2020. The largest cryptocurrency in stock fell about 70% from its record high in November. The fund made its debut in February 2021.

“The huge outflows are most likely caused by a forced seller in a huge liquidation. “The forced sale of 24,000 BTC could have caused the BTC to fall to $ 17,600 this weekend,” Vetle Lunde, an Arcane Crypto analyst, wrote in a research report.

Nate Geraci, president of The ETF Store, a consulting firm, agrees that the outflow appears to be a forced sale. And it could happen that some holder – or holders – could quickly need the Bitcoin subject.

For example, it may involve a large merchant using a margin that is unable or unwilling to respond to a margin call, he said. Or it could be a different situation in which a person or entity has to meet a loan obligation when the lender has the ability to liquidate and secure the collateral that the loan supports, Geraci added.

Bitcoin futures and ETF spots were popular among investors who are not willing to hold Bitcoin but want to gain this exposure in their portfolios. The funds have been hit hard recently in the midst of a slip in the price of cryptocurrency. Bitcoin ETPs have a net outflow of 18,315 coins as of June 21, according to Arcane Crypto.

“This is by far the most serious acquisition we have seen in the relatively short history of the BTC ETF and has helped shrink Purpose’s Bitcoin management to levels not seen since October 2021,” Lunde said.

Europe had many encryption tracking products that act as ETFs before the launch of the Purpose Fund. The US Securities and Exchange Commission has repeatedly rejected requests for a physically supported ETF, citing price volatility and the risk of market manipulation.

“The recent blood cryptocurrency has shown that there is no lack of leverage in the system, which works well on the way up, but not so well on the way down,” Geraci said, adding that he did not see the issue as an ETF. . “The bottom line is that the forced liquidation of cryptocurrency traders by leveraging probably caused Bitcoin to crash, not something related to the structure of the Bitcoin ETF.”

(Adds a company and analyst comment starting in the third paragraph.)

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