Bitcoin ETFs Are Fine Despite Suffering Their Worst String of Outflows, Says Expert

Investors during late August and early September pulled roughly $1.2 billion out of the funds over eight consecutive days, the longest streak of exits so far.

Investors pulled roughly $1.2 billion out of the 12 U.S. spot exchange-traded funds (ETFs) over eight consecutive days in late August and early September. While that might seem concerning on its face, it's more likely a sign of healthy growth, an ETF expert says.

“This is going to be two steps forward, one step back,” Eric Balchunas, senior ETF analyst at Bloomberg, told CoinDesk. "That’s the way many ETF categories are born and mature,” he said. “Nothing goes up in a straight line – flow-wise – ever because ETFs service long term investors and traders.”

The funds bled roughly $1.2 billion worth of bitcoin (BTC) between Aug. 27 and Sept. 6, according to data from Farside Investors. At eight, that was the most consecutive days of net outflows that the ETFs have experienced since launching on Jan. 12.

The $1.2 billion represented roughly 3% of total assets in the funds, which, according to Bianco Research, stood at $46 billion after the outflows. A worrisome number, Balchunas said, would be more like 15%-20%.

The ETF issuers have mostly been blessed with sizable amounts of cash flowing into their newly-opened funds. In their first two months of trading, the ETFs saw net inflows totallng $12 billion, according to Bianco Research. Not as bullish on the funds as Balchunas, Bianco noted that the pace of inflows has since slowed, with just $4 billion of new money over the next six months, including only $1 billion over the past three months.

“The key to building a category isn't so much taking in money when there's good times, but it's limiting the outflows at bad times and I've seen these Bitcoin ETFs do a great job in the latter,” Balchunas said, referring to recent large price sell-offs associated with Mt. Gox and the German government, during which the ETFs quickly reverted to inflows after seeing only modest exits of money.

“The [ETFs have] really done a good job keeping bitcoin out of the abyss,” Balchunas said. “They have saved bitcoin’s butt a couple times in the past couple months, from real, real depths.”