Bitcoin Retreats as Grayscale ETF Posts Biggest Daily Outflow

Ryan Weeks, Bloomberg News

, Bloomberg

(Bloomberg) -- Bitcoin extended a retreat as investors digested a record daily outflow from the world’s biggest exchange-traded fund for the token as well as scaled-back expectations for Federal Reserve interest-rate cuts.

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The largest digital asset shed about 5.3% to trade at $63,800 as of 12 p.m. Tuesday in New York. Other major tokens such as Ether, Solana and meme-crowd favorite Dogecoin also nursed losses.

The $25 billion Grayscale Bitcoin Trust, or GBTC, posted a $643 million outflow on Monday, the most since it converted into an ETF on Jan. 11, data compiled by Bloomberg show. Earlier, strong demand for nine new spot-Bitcoin ETFs that went live at the same time had more than made up for a spate of GBTC exits.

But those flows into products from titans such as Fidelity Investments and BlackRock Inc. are also cooling, and the batch of 10 ETFs as whole saw a net outflow of $154 million on March 18.

QCP Capital, a crypto trading firm based in Singapore, wrote in a note on Tuesday that it would be “closely tracking the aggregate ETF flow numbers today,” adding that a “net negative would be a distinctly bearish signal.”

Retail sentiment around Bitcoin appears to be declining, according to Matrixport analyst Markus Thielen. “Retail sentiment has already declined materially as meme and Altcoins trading volumes have dropped sharply during the last week,” Thielen said. “We at 10x Research are expecting this pullback to last until Bitcoin declines to 59,000.”

The total market value of memecoins is down by 16.2% to $48.5 billion, according to tracker CoinGecko. Top memecoins such as Dogecoin, Shiba Inu, and Pepe saw their prices dropped by as much as 8% in the past day.

Searches for Bitcoin have also declined sharply from a high on March 5, when Bitcoin set an all-time high, according to Google Trends data. Google Trends data does not display raw search numbers, but uses an index from zero to 100 to show relative search popularity.

Since they began trading, the ETFs overall have attracted a net $12 billion. The investor interest propelled Bitcoin to an all-time peak of $73,798 last week. The crypto bellwether has since wobbled as the initial pulse of demand for the products fizzles amid warnings about bubble-like traits in some assets.

Risks from monetary policy are among the wild cards. Persistent inflationary pressures are curbing expectations for looser Fed settings, while Japan just drew the curtain on the most aggressive monetary stimulus program in modern history, scrapping the world’s last negative interest rate.

GBTC’s manager Grayscale Investments LLC intends to launch a clone of the fund as it vies with rivals offering cheaper products. Fees are expected to be lower than for GBTC, a person familiar with the matter earlier told Bloomberg.

--With assistance from Muyao Shen and Elijah Nicholson-Messmer.