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Bitcoin ETFs show minimal reaction as BTC declines by 40%, according to Bloomberg’s Eric Balchunas.
Bitcoin has decreased by over 40% from its peak in October, yet investors in spot Bitcoin ETFs have withdrawn only 6.6% of their assets.
Latest developments: Investors in ETFs are demonstrating a surprising level of resilience during bitcoin’s recent decline. In a discussion on CoinDesk’s Markets Outlook, Eric Balchunas, Senior ETF Analyst at Bloomberg Intelligence, pointed out several significant data trends that reflect this steadiness:
- Bitcoin has experienced a drop exceeding 40% from its recent peaks, a trend that typically unsettles retail-focused crypto markets.
- During the same timeframe, merely 6.6% of Bitcoin ETF assets have been withdrawn.
- “At present, the ETF investors have really shown their strength,” he noted.
Why ETF holders are holding: Balchunas posits that ETF investors are fundamentally different from traders who are native to crypto.
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- Numerous ETF purchasers view bitcoin as a 1%–2% “hot sauce” allocation within a mix of stocks and bonds, rather than as a primary investment.
- Their overall investment portfolios have gained from robust equity markets, mitigating the psychological impact of crypto downturns.
- ETF investors “tend to remain very steady,” Balchunas remarked, having experienced multiple market cycles with traditional assets.
The contrast with crypto natives: The same price decline can evoke vastly different feelings based on one’s level of investment exposure.
- Investors with a heavy focus on bitcoin encounter what Balchunas described as “existential crisis mode.”
- Traders utilizing leverage and long-term holders may be contributing more to the selling pressure compared to ETF investors.
- “Volatility is the price of the returns,” Balchunas stated, highlighting that bitcoin has faced seven or eight comparable drawdowns historically.
Lessons from gold ETFs: Balchunas identifies similarities between bitcoin and gold as assets packaged in ETFs.
- Gold ETFs experienced a decline of approximately 40% over six months around a decade ago, during which about one-third of their assets exited.
- Despite this, gold ETFs eventually rebuilt their assets and currently manage roughly $160 billion.
- Bitcoin ETFs briefly approached the size of gold ETFs prior to the recent market selloff, illustrating how asset flows can change over time.
What comes next: Ongoing volatility is expected; however, ETFs may solidify bitcoin’s role within traditional finance.
- Balchunas indicated that bitcoin’s 17-year history reflects a pattern of recovering to new highs following significant downturns.
- The structure of ETFs positions Bitcoin alongside stocks, bonds, and commodities in conventional portfolios.
- “A selloff doesn’t signify the conclusion,” he remarked. “It merely indicates a selloff.”
