Bitcoin (BTC) funds bleed coins as US bank failures fuel expectations of an imminent Federal Reserve (Fed) turn towards liquidity easing.
Data tracked by ByteTree Asset Management shows that the number of coins held by closed-end funds, spot and futures-oriented exchange-traded funds (ETFs) in Europe, the US and Canada fell by 16,560 BTC this month ($409 million) has declined from a 17-month low of 826,113 BTC.
ETFs and other investment vehicles that provide exposure to Bitcoin without having to own the cryptocurrency are widely seen as proxies for institutional activity.
The fall in the fund balance suggests a lack of institutional involvement in the recent Bitcoin rally, which was reportedly fueled by safe-haven demand and renewed hopes of Fed rate cuts in the second half of the year. According to some observers, the gains are evidence of Bitcoin’s growing appeal as a hedge against the banking system.
Bitcoin received a strong bid of nearly $19,600 late Friday after Silicon Valley Bank, formerly one of the top 20 lenders in the US, suspended operations. Prices are up over 25% since then, hitting a nine-month high of $26,501 on Tuesday, data from CoinDesk shows.
“Institutions don’t believe BTC is serious and will stay here,” Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk. “The wealth management industry globally is very thrifty in both bitcoin and gold.”
However, Morris warned against jumping to conclusions from the data, saying a large outflow from a single fund was primarily responsible for the balance sheet being dragged down.
Also, the fall in balances held in funds does not necessarily mean that the price rally is lacking in strength and is unsustainable. Markus Thielen, Matrixport’s head of research and strategy, said that fund holdings make up a small portion of the overall market and other sources of demand are driving prices higher.
“The data on the fund holdings are not meaningful. I suspect USDC holders are converting their stablecoin to BTC,” Thielen noted. Binance recently announced that it is converting $1 billion worth of funds held in BUSD to Bitcoin, BNB and Ether.
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