Market Retreat in Bitcoin Driven by ETF Investors
This month’s downturn in the bitcoin market is largely attributed to a withdrawal from exchange-traded fund (ETF) investors, who have withdrawn billions of dollars as the asset’s price has declined. This pullout indicates that investors now view crypto ETFs more like long-term investment vehicles rather than a trend.
So far this month, approximately $4 billion has been withdrawn from digital asset ETFs—an unprecedented amount. BlackRock’s IBIT ETF experienced a single-day outflow of over half a billion dollars.
Primary Drivers and Retail Participation
JPMorgan analysts pointed out that the continuation of the crypto market correction in November has been driven mainly by non-crypto investors, predominantly retail participants, who often use spot bitcoin and Ethereum ETFs as entry points into the market.
After hitting a peak above $125,000 in October, bitcoin’s recent decline has pushed it below JPMorgan’s support level of $94,000. According to CoinDesk, short-term holders—defined as those holding the asset for fewer than 155 days—are nearly entirely underwater on their recent purchases.
Retirees and newcomers to digital assets often trade them similarly to stocks, showing little patience in the face of price dips. Despite the decrease in value, retail investors have continued to pour close to $100 billion into equity ETFs in November. JPMorgan analysis notes that these groups typically sell off crypto while heavily investing in equities during February and March.
Industry Growth and Pending Approvals
While the outflows represent a significant portion, total capital allocated to crypto funds remains substantial, with net inflows standing at nearly $60 billion. The crypto fund industry is still in its early stages, having gained SEC approval for 11 bitcoin-based funds in January 2024 and five ether-based funds shortly thereafter.
Many more funds are aiming to enter this market. As of last month, 92 additional crypto funds were awaiting SEC approval, including some tied to lesser-known assets like Avalanche and Bonk. Grayscale’s Multi-Asset Crypto Exchange-Traded Product, Digital Large Cap Fund (GDLC), has already received approval as the crypto world’s first mutual fund equivalent.
