On May 1, U.S. spot Bitcoin ETFs experienced major outflows, with BlackRock's iShares Bitcoin Trust recording its first-ever outflow of $36.9 million. This outflow came along with a more than 10% drop in Bitcoin's price over the past week. Due to this, there has been some concerns about investor panic among recent buyers, who face unrealized losses due to BTC now trading below its average purchase price.
Despite this, some analysts are still optimistic, and see the price drop as part of the typical lifecycle of cryptocurrencies. Meanwhile, Bitcoin mining firm Riot Platforms reported a record net income of $211.8 million for Q1 2024, although it did still face other challenges like increased mining costs.
Record Outflow Day for U.S. Bitcoin ETFs
On May 1, U.S. spot Bitcoin exchange-traded funds (ETFs) saw big net outflows, with BlackRock's iShares Bitcoin Trust (IBIT) recording its first-ever outflow of $36.9 million. This was also the case across nine other Bitcoin ETFs, which collectively saw $526.8 million withdrawn, according to data from Farside Investors. The Hashdex Bitcoin ETF was the only fund that did not report any changes in its assets.
The Fidelity Wise Origin Bitcoin Fund faced the biggest losses, with $191.1 million leaving the fund. Following closely, the Grayscale Bitcoin Trust reported $167.4 million in outflows. The ARK 21Shares Bitcoin ETF and Franklin Bitcoin ETF also saw large withdrawals, totaling $98.1 million and $13.4 million, respectively.
This happened after a 10+% drop in Bitcoin's price over the past week. However, despite these outflows from Bitcoin ETFs, ETF Store president Nate Geraci pointed out that something similar happened in the gold market. He noted that the iShares Gold ETF and SPDR Gold ETFs saw outflows of $1 billion and $3 billion, respectively, this year.
Bloomberg ETF analyst James Seyffart also shared his thoughts on the recent outflows and pointed out that the Bitcoin ETFs are stable despite these fluctuations. He believes big inflows and outflows are very typical in the life cycle of ETFs.
Panic or Potential?
After its latest price drop, BTC is trading below the average purchase price paid by short-term holders, which might start causing panic among these investors because of unrealized losses. Analyst James Check shared in a May 1 report that recent buyers, who have held Bitcoin for less than 155 days, are statistically more likely to panic sell. This group of investors bought in at an average price of $59,600, and with the current trading price of BTC sitting around $57,319, they face an average unrealized loss of 3%.
The recent downturn in Bitcoin's price began with a sharp 8% drop below a key support level, reaching its lowest point since February at $56,814. This price movement was major as BTC dipped below the short-term holder's cost basis, which often acts as either support or resistance depending on market conditions.
The decline in Bitcoin's value over the past 24 hours is part of a much broader sell-off in the crypto market as people waited for the Federal Reserve’s decision on interest rates. Despite expectations, the Fed chose to maintain high interest rates, which ended up further influencing market sentiments. The result was a huge $100.27 million worth of liquidated long positions in Bitcoin.
On the bright side, Check firmly believes that breaking below the cost basis is not catastrophic for the bull market and it is still possible for traders to recover from their current unfortunate position. On-Chain College agrees with this. In fact, a swift recovery to around $59,600, which is just 2.2% above the current price, could indicate bullish momentum. In June of 2023, something like this happened when a similar drop was followed by a robust market upswing.
On-Chain College also suggested that even a prolonged period below the cost basis, like what was seen in August of 2023, might still signal a bullish trend for Bitcoin. Overall, while the immediate market conditions may seem daunting, historical patterns and expert analysis suggest that these might only be temporary setbacks before a potential recovery.
Bitcoin's Path After the Halving
Since the Bitcoin halving happened on Apr. 20, the price of BTC has dropped around 11%, from about $64,000 at the time of the event to below $57,000 on May 1. A sharp post-halving price drop like this certainly defies the expectations set by previous cycles, which historically saw big rallies a year or more after halving events. For instance, after the 2016 halving, Bitcoin surged by 3,000% over 17 months.
The current price trajectory differs from past cycles, especially because this cycle had a large bull run before the halving, pushing Bitcoin to a new all-time high just before the event. According to Mati Greenspan, founder of Quantum Economics, despite the recent decline, Bitcoin is still up 35% since the start of the year. He believes the current downturn is caused by broader economic pressures and anticipates more clarity on market directions after certain impending economic updates.
For some, BTC’s drop did not come as much of a surprise. JPMorgan analysts predicted a decline toward $42,000 and 10x Research CEO Markus Thielen estimated a fall to $52,000. Thielen points to a slowdown in inflows into Bitcoin ETFs as a major factor behind the recent rally and subsequent decline. Despite these challenges, some experts, like investment researcher Lyn Alden, are still very optimistic about Bitcoin's potential to reach new highs in 2024.
Riot Platforms Reports Stellar Profits
Despite BTC’s dip, Bitcoin mining firm Riot Platforms reported a huge increase in its financial performance for the first quarter of 2024, with a record net income of $211.8 million. This is a 1,000% increase from the previous year. Despite this, the company's revenue of $79.3 million still fell short of analyst expectations by 14%, according to estimates from research firm Zacks.
The company's mining revenue rose by 55.4% year-on-year to $74.6 million, largely because of the 131% increase in the price of Bitcoin. However, Riot also faced some challenges like a 36% decrease in Bitcoin production compared to the first quarter of 2023, and a 144% increase in the average cost of mining one Bitcoin, which now stands at $23,000. These challenges were attributed to heightened Bitcoin network difficulty and an 89% rise in global network hash rate.
While dealing with these operational challenges, Riot announced the development of a new mining facility in Corsicana, Texas, last month. When it is fully operational, CEO Jason Les believes this facility will be the largest dedicated Bitcoin mining site in the world. The company also plans to boost its hash rate capacity from the current 12.4 exahashes per second to 31 EH/s by the end of the year, with a long-term goal of reaching 100 EH/s by 2027.
