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Bitcoin ETFs experienced $81+million in outflows on Wednesday, but BlackRock's IBIT and Franklin's EZBC saw inflows. Meanwhile, spot Ethereum ETFs continued to attract positive inflows. Institutional interest in Bitcoin ETFs stayed robust in Q2 2024, and the majority of investors ended up holding or increasing their positions, despite Bitcoin's price decline. Morgan Stanley shared that it has a $188 million stake in BlackRock's IBIT ETF, while Vanguard has opted out of the crypto ETF market.
Bitcoin ETF Outflows Surge
Spot bitcoin exchange-traded funds (ETFs) were hit with $81.36 million in outflows on Wednesday, ending a two-day streak of positive inflows. BlackRock’s IBIT, bucked the trend with net inflows of $2.68 million, while Franklin’s EZBC saw its first net inflows since July 22, totaling $3.42 million. These were the only two bitcoin ETFs to report inflows for the day.
On the other hand, Grayscale’s GBTC reported the largest outflows, with $56.87 million exiting the fund, followed by Fidelity’s FBTC, which saw $18.05 million in outflows. Ark and 21Shares’ ARKB and Bitwise’s BITB also experienced outflows of $6.77 million and $5.78 million, respectively. The six remaining spot bitcoin ETFs reported no activity in terms of flows.
Bitcoin ETF flow (Source: Farside Investors)
Total trading volume across all spot bitcoin ETFs reached $1.3 billion on Wednesday, which was an increase from the $1.18 billion recorded the previous day.
In contrast, spot Ethereum ETFs continued their streak of positive inflows, with a total of $10.77 million flowing into the nine available funds on Wednesday. This was the third consecutive day of positive inflows for ether ETFs. However, Grayscale’s Ethereum Trust (ETHE) diverged from the trend and experienced outflows of $16.95 million..
The Grayscale Ethereum Mini Trust (ETH) saw modest inflows of $2.26 million after a two-day period of zero flows. BlackRock’s ETHA led the inflows among ether ETFs with $16.13 million, followed by Fidelity’s FETH with $6.65 million, and Bitwise’s ETHW with $2.67 million in net inflows.
Ethereum ETF flow (Source: Farside Investors)
Despite the inflows, the total trading volume for the ether ETFs dropped to $155.91 million on Wednesday, down from $190.76 million on Tuesday and $285.96 million on Monday.
Bitcoin ETFs See Strong Institutional Support in Q2
During the second quarter of 2024, around 66% of institutional investors either held or increased their Bitcoin holdings through U.S.-based ETFs, according to data from Bitwise. By analyzing the 13F filings with the U.S. Securities and Exchange Commission (SEC), it was revealed that 44% of asset managers increased their Bitcoin ETF positions, while 22% maintained their existing positions. Meanwhile, 21% of investors reduced their holdings, and 13% exited entirely.
Despite a 14.5% decline in Bitcoin's value over the three-month period, the second quarter was bullish for spot Bitcoin ETFs. Bitwise’s chief investment officer Matt Hougan pointed out that the trend of institutional adoption of Bitcoin ETFs remained strong, with the number of holder/ETF pairs increasing by 30% from 1,479 in Q1 to 1,924 in Q2.
Hougan also shared that institutional investors displayed resilience during periods of market volatility, and were steady in their positions, unlike the panic selling often seen among retail investors. Hedge funds like Millennium, Schonfeld, Boothbay, and Capula were some of the big players among ETF holders, but a diverse group of advisers, family offices, and select institutional investors also contributed to the trend.
Hougan is excited that these ETFs are attracting a wide variety of investors, and expects wealth managers and pension funds to represent a growing share of ETF holdings in the future.
Morgan Stanley Holds $188M in BlackRock Bitcoin ETFShares
U.S. investment banking firm Morgan Stanley also revealed in an Aug.14 filing with the SEC that it held approximately $188 million worth of shares in BlackRock’s iShares Bitcoin Trust (IBIT) ETF as of June 30, 2024. The filing revealed that the firm owned more than 5.5 million shares of the IBIT ETF during the second quarter.
In addition to its large stake in IBIT, Morgan Stanley also reported smaller investments, each under $300, in various other crypto-related ETFs, including those offered by Valkyrie, Fidelity, Bitwise, Invesco, and Proshares. The investments were made before Morgan Stanley announced that its financial advisers would be permitted to recommend Bitcoin ETFs to clients, specifically IBIT and the Fidelity Wise Origin Bitcoin Fund (FBTC).
Former SEC official John Reed Stark suggested that this move could subject Morgan Stanley’s advisers to extensive scrutiny from the SEC and FINRA, which could lead to one of the largest examination sweeps in history.
Beyond its stake in IBIT, Morgan Stanley also held roughly $148,000 worth of shares in Grayscale’s Bitcoin Trust (GBTC) and $1.6 million in the Ark21Shares Bitcoin ETF. Meanwhile, Goldman Sachs also recently reported holding over $238 million in shares of IBIT and other Bitcoin-related ETFs.
Vanguard Opts Out of Crypto ETF Race
Vanguard Group, the world’s second-largest issuer of ETFs, has decided not to participate in the growing trend of cryptocurrency ETFs, according to CEO Salim Ramji. In an interview on Aug 14, Ramji confirmed that Vanguard will not be launching crypto ETFs. According to Ramji, the decision was made to stay consistent with the company’s identity rather than following competitors.
Largest ETF providers (Source: stockanalysis.com)
Vanguard’s decision is turning quite a few heads considering the surge in crypto ETF listings by other major ETF sponsors, including BlackRock. BlackRock launched its iShares Bitcoin Trust (IBIT) in January and the iShares Ethereum Trust (ETHA) in July, which now hold close to $21 billion and $800 million in assets, respectively.
The year 2024 saw record-breaking inflows into Bitcoin ETFs, and adoption expanded as more established wealth managers like Morgan Stanley started to embrace these products.
Despite this rapid adoption, Vanguard plans to differentiate itself by focusing on products designed to protect investors from downside risks, like retirement income strategies and tools to manage drawdowns. Ramji stated that while the industry has focused on helping clients accumulate assets, Vanguard wants to provide solutions that address the challenges of managing drawdowns during market downturns.
Marathon Digital Buys $249M in BTC
Meanwhile, Bitcoin mining company Marathon Digital bought an additional $249 million worth of BTC after a $300 million capital raise from a senior note offering. On Aug. 14, Marathon shared that it used a portion of the note sale proceeds to buy about 4,144 BTC at an average price of $59,500. Its strategic Bitcoin reserve now stands at over 25,000 BTC.
The company raised around $292.5 million from its convertible senior notes, due in September of 2031, which bear a 2.125% annual interest rate and can be converted into cash, Marathon stock, or both. According to Marathon, the remaining funds from the note sales will be used to purchase more Bitcoin and potentially for strategic acquisitions and other general corporate purposes.
A spokesperson for Marathon stated that the company sees Bitcoin as a premier strategic treasury asset and is employing a multifaceted strategy to buy it. This latest purchase happened after Marathon’s acquisition of 2,282 BTC in July for $124 million.
Earlier in August, Marathon reported its second-quarter earnings, which fell short of Wall Street estimates. The company posted revenues of $145.1 million, which was 9% below expectations, but still experienced a 78% increase year-over-year compared to Q2 of 2023.
