Spot Bitcoin ETF Inflows Hit $500M Amid Growing Demand

Bitcoin has proven to be one of the best-performing assets of the last decade. But if you’re looking for a way to profit from the surging interest in Bitcoin without directly buying or trading, consider a Spot Bitcoin ETF.

These exchange-traded funds will enable investors to gain exposure to Bitcoin without the technical challenges of managing the underlying asset. What's more, our Bitcoin Indicators and Bitcoin analysis will show how a Spot Bitcoin ETF could attract significant institutional investment, which would likely send the price of Bitcoin soaring.

US Spot Bitcoin ETFs Record $500 Million in Net Inflows

On September 27, 2024, U.S. spot Bitcoin ETFs recorded unprecedented net inflows of $494.27 million, marking a six-day streak of positive flows. The recent growth shows renewed investor interest in Bitcoin, as regulatory concerns surrounding spot Bitcoin ETFs have eased.

Spot Bitcoin ETFs allow investors to gain exposure to Bitcoin's price movements without purchasing, securing, or managing.

Spot Bitcoin ETFs Are Back in Business

Spot Bitcoin ETFs are back in the spotlight after recording impressive net inflows of $494.27 million on September 27. The inflows mark a six-day streak of positive flows that commenced on September 19.

According to data from Sosovalue, Ark & 21Shares, ARKB outperformed other ETFs by recording the most significant inflow.

ETF Inflows Surge

The ETF saw inflows worth $203.07 million, bringing its cumulative net inflow to $2.72 billion. ARKB’s inflows mark a substantial increase from the $113.8 million recorded on September 26.

Fidelity’s FBTC came in second with inflows worth $123.61 million. FBTC also saw a significant increase in net inflows from $74 million recorded on 26 September. BlackRock’s iShares Bitcoin Trust (IBIT) Exchange Traded Fund registered inflows worth $110.82 million, marking a five-day streak of positive flows.

IBIT Remains Top

The fund also registered an increase from $93.4 million recorded on 26 September. IBIT now has a cumulative net inflow of $21.42 billion, cementing its reign as the most significant spot in the Bitcoin ETF.

Grayscale’s GBTC came in fourth with net inflows worth $26.15 million. On September 26, GBTC recorded outflows worth $7.7 million.

Other ETFs Follow

Bitwise’s fund BITB trailed GBTC with net inflows worth $12.91 million, bringing its cumulative net inflow to $2.15 billion. BITB registered a significant decline in inflows from $50.4 million, as recorded on September 26.

VanEck’s HODL witnessed $11.17 million in inflows, bringing its cumulative net inflows to $650.13 million. Invesco’s BTCO came in next with inflows totaling $3.28 million, and Valkyrie’s BRRR recorded the least inflows worth $3.26 million.

Some ETFs Lag

Both BTCO and BRRR inflows declined from $6.5 million to $4.6 million worth of inflows registered on 26 September. Grayscale’s BTC, Franklin’s EZBC, Wisdom Tree’s BTCW, and Hashdex’s DEFI did not register any flows, and none of the ETFs recorded any outflows.

Spot Bitcoin ETFs Are Essential to the Bitcoin Market

Bitcoin ETFs have achieved a cumulative total net inflow of $18.69 billion, an increase from $18.31 billion recorded on September 26. The total net assets held by all Bitcoin spot ETFs sit at $61.21 billion, which is 4.71% of Bitcoin’s market cap.

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What Is a Spot Bitcoin ETF?

Spot Bitcoin ETFs are financial instruments that track Bitcoin’s price in reserve and back each share of the ETF with real Bitcoin. These ETFs provide investors with direct exposure to Bitcoin’s price movements without the need to buy, store, or manage Bitcoin themselves.

They function similarly to traditional ETFs but focus on BTC as the underlying asset. Currently, eleven spot Bitcoin ETFs are available in the United States.

What is the Difference Between Spot Bitcoin ETFs and Bitcoin Futures?

Spot Bitcoin ETFs and Bitcoin futures offer different approaches to Bitcoin investment. Spot Bitcoin ETFs purchase and hold real Bitcoin in a custodial account, with the ETF shares reflecting the market price of Bitcoin.

These ETFs operate within regulated financial markets, ensuring security and compliance with legal standards. Reputable custodians manage Bitcoin storage to mitigate risks like hacking or loss.

Futures ETFs Differ

Bitcoin futures are derivative contracts that track Bitcoin futures contracts, which are agreements to buy or sell Bitcoin at a future date for a predetermined price. While spot ETFs provide direct exposure to actual Bitcoin, futures ETFs involve rolling over futures contracts, introducing complexities and additional costs.

Spot ETFs track the price of Bitcoin in real-time, whereas futures ETFs track the price of futures contracts, which might differ from the spot price due to market speculation and futures market dynamics.

How Bitcoin ETFs Appeal to Institutional and Retail Investors

Spot Bitcoin ETFs offer both institutional and retail investors a simpler way to gain exposure to Bitcoin. For individual investors, spot Bitcoin ETFs provide a regulated and secure method to include Bitcoin in their portfolios:

• Aiding in diversification 
• Potentially enhancing returns

Institutions can trade these ETFs on traditional stock exchanges, simplifying the incorporation of Bitcoin into their existing investment strategies. This creates a pathway for institutional and retail capital to find its place in the marketplace.

Institutional Investment in Spot Bitcoin ETF

Institutions that invest in spot Bitcoin ETFs typically purchase ETF shares through brokerage accounts and incorporate these into their diversified portfolios. The ETFs provide institutions with a liquid, tradable asset that aligns with their investment strategies and regulatory compliance requirements.

Institutions may benefit from the oversight and security measures provided by custodians managing the ETFs’ underlying Bitcoin holdings.

Retail Investment in Spot Bitcoin ETFs

Retail investors also use brokerage accounts to invest in spot Bitcoin ETFs. They can buy and sell ETF shares through the market or limit orders, much like trading stocks. This process is straightforward and familiar to those accustomed to traditional investments.

In both retail and institutional use cases, investors benefit from ETFs' liquidity and transparency, along with the reduced complexity and enhanced security of regulated financial products. 

The Market Impacts of Bitcoin ETFs

The price of Bitcoin began an upward ascent soon after news of the Bitcoin ETF approval broke on January 10, 2024. Trading commenced soon after, with an unprecedented 11 ETFs trading on day one. At the same time, there was a substantial spike in Bitcoin transfer volumes during the week of the ETF’s approval.

Spot Bitcoin ETFs enhance accessibility by allowing investors to buy and sell shares through traditional brokerage accounts, just like stocks or other ETFs. This can reduce the complexity of purchasing and securely storing Bitcoin.

Regulatory Oversight Ensures

Regulatory oversight from financial authorities ensures these ETFs operate within a legal framework, offering a high degree of investor protection and confidence.

This regulatory environment helps mitigate risks related to fraud and market manipulation, making investments in Bitcoin secure and trustworthy.

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Record Spot Bitcoin ETF Performance And Powerful Tailwinds

Collectively, the spot Bitcoin Exchange Traded Funds (ETFs) launch has been the most successful ETF debut in history. A couple of key milestones stand out: 

• No other ETF had experienced $3 billion of inflows in its first month
• Bitcoin had two, including Blackrock's IBIT and Fidelity's FBTC

Inflows Break Records

Altogether, Bitcoin ETFs attracted an impressive $17 billion of inflows during their first nine months, shattering the previous full-year record by QQQInvesco QQQ Trust of $13 billion.

IBIT also achieved another milestone by maintaining the 10th longest inflow streak on record, with 71 consecutive days of positive inflows from its launch.

Spot Bitcoin ETFs Generate Massive Inflows

This record-breaking period shows the importance of the Bitcoin ETFs and their unique ability to generate massive inflows. Although inflows have slowed recently, they have outpaced Bitcoin’s price action. While Bitcoin's price has consolidated within a descending channel since March, inflows have continued to build.

The divergence between flows and price may provide key insights into this consolidation period and future price movement:

• It suggests that ETF buyers are relatively price-insensitive, accumulating positions despite price declines. 
• These investors are less likely to panic-sell, potentially cushioning the downside during corrections. 
• Market corrections can occur through sharp price drops or prolonged consolidation, and ETF holders are steering Bitcoin toward the latter, resulting in extended periods of stability. 
• While inflows tend to correlate with price increases, their steady accumulation builds pressure, gradually pushing Bitcoin through key resistance levels.

Bitcoin Breaks Through

Bitcoin's price broke through one of those key resistance levels this week, hitting 8-week highs and marking the first higher high since March. This move has sparked excitement for a potential end-of-year rally.

Spot Bitcoin ETFs Are Transforming Bitcoin's Fundamentals 

Bitcoin ETFs are transforming Bitcoin’s fundamentals. As some of the most successful ETFs ever launched, they are setting the stage for an explosive fourth quarter for Bitcoin.

Bitcoin Enters Q4 With Bullish Catalysts

Historically, the fourth quarter has been Bitcoin’s most bullish period, averaging 88.8% returns. This trend is even more pronounced during halving years, such as 2016 and 2020, when Q4 returns averaged an impressive 113%.

As we move into Q4, Bitcoin is positioned to benefit from multiple tailwinds beyond just ETF inflows. Last week, the SEC fast-tracked approval for options trading for IBIT months ahead of schedule, marking the first such approval for a spot Bitcoin ETF.

Options to Attract

These options will be listed on Nasdaq ISE and are expected to attract more investors by offering additional ways to gain exposure to Bitcoin. While further regulatory approvals are required before the options are officially listed, market analysts such as Eric Balchunas, senior ETF analyst for Bloomberg, are very optimistic.

Balchunas wrote on X, “Huge win for the Bitcoin ETFs (as it will attract more liquidity which will in turn attract more big fish).”

FTX Bankruptcy May

Further adding to the positive outlook, the ongoing FTX bankruptcy proceedings are anticipated to inject significant capital into the market in the fourth quarter. Creditor distributions, which may total up to $16 billion, are anticipated to start in early October.

Rumors of immediate October 1st payouts remain speculative, however, their latest press release confirmed that final voting results will be presented on October 7, 2024, ahead of the confirmation hearing.

FTX Plan May

With strong preliminary support for FTX's amended Plan of Reorganization from over 95% of voting creditors, the plan aims to return 100% of bankruptcy claims. These payouts are in U.S. dollars, and a large percentage is expected to flow back into the market, with Bitcoin likely receiving the largest share.

Fed Rate Cuts and Global Central Bank Easing

These Bitcoin-specific catalysts are unfolding alongside another major development—the Federal Reserve's first interest rate cut since March 2020.

Last week, during the September Federal Open Market Committee meeting, the Fed reduced rates by 50 basis points, marking a significant shift toward more accommodative monetary policy.

Central Banks Cut

The Fed's rate cut comes as part of a broader trend. Other central banks, including:

• The European Central Bank
• The Swiss National Bank
• The Bank of Canada have also begun cutting rates 

Interestingly, the People’s Bank of China has also initiated rate cuts and large-scale economic stimulus despite not participating in the coordinated tightening seen in other regions.

Central Bank Pivot

This raises the question: would we have ended up in the same economic situation regardless of central bank actions? That might be a discussion for a future post.

Nevertheless, the central banks’ pivot toward cutting rates adds a tailwind for Bitcoin in the medium term. This dovetails with the rising global M2 money supply, which further fuels risk-on sentiment.

Central Bank Cuts

While central bank cuts usually reflect worsening macroeconomic conditions, they can boost markets in the short term by creating a more favorable environment for risk assets. We’re already seeing global M2 break to new highs.

As we head into Q4, Bitcoin finds itself at the crossroads of several powerful market forces. Historical trends point to strong performance in the final quarter, especially during halving cycles.

Bitcoin Could Gain

This time, Bitcoin is further buoyed by regulatory progress, potential capital inflows from FTX distributions, and a more accommodative global monetary policy. Together, these factors suggest Bitcoin ETFs could gain renewed momentum and potentially see record-breaking inflows as the year closes. 

With price action starting to align with ETF flows, the conditions are ripe for a highly bullish end to 2024 for Bitcoin.

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How to Buy into Spot Bitcoin ETFs

Find a Brokerage to Buy Spot Bitcoin ETFs

Not just any brokerage will do. Investors must select a brokerage that offers access to Bitcoin ETFs. While many popular brokerages now allow customers to trade spot Bitcoin ETFs, some may impose restrictions on trading based on your location. Others may charge high fees, negating potential investment returns.

Open a Brokerage Account

If you do not already have a brokerage account, you must open one to start trading spot Bitcoin ETFs. Opening a brokerage account is straightforward. You provide basic personal information, including your:

• Name
• Address
• Social Security number

Fund Your Account

After opening your brokerage account, you can begin funding it. Deposit methods vary by brokerage but often include:

• Electronic bank transfers
• Eire transfers
• Checks

Some brokerages even allow instant deposits that let you trade immediately before your transfer fully clear.

Search for the Spot Bitcoin ETF You Want to Buy

Once your account is funded, you can search for the spot Bitcoin ETF you want to buy. You can find ETFs by their ticker symbol or name.

Choose an Order Type and Execute Your Trade

You can execute your trade after locating the ETF you want in your brokerage account. You must decide if you wish to use a market or limit order.

A market order buys the ETF at the current price, while a limit order sets a specific price at which you want to buy the ETF. Limit orders can help you avoid price slippage, which can occur if the ETF is highly volatile.

Selling Spot Bitcoin ETF Shares

Selling shares of spot Bitcoin ETFs is similar to the process above. Locate the ETF in your account, choose an order type, and execute the trade.

Top 11 Spot Bitcoin ETFs by Fee

Do Spot Bitcoin ETFs Have Custodianship Risk?

Custodianship risk refers to the potential danger that comes from using a third party to hold your Bitcoin. Most spot Bitcoin ETFs rely on a third-party custodian to store the Bitcoin they hold, much like spot gold ETFs often keep their physical gold holdings in the vault of a third-party custodian.

Eight of the 10 currently trading spot Bitcoin ETFs use Coinbase as their Bitcoin custodian. The only exceptions are the Fidelity Wise Origin Bitcoin Fund, which uses Fidelity itself as a custodian, and the VanEck Bitcoin Trust, which uses Gemini.

Custodianship Risk

Coinbase's dominance in Bitcoin ETF custodianship has created concerns about custodianship risk. Suppose Coinbase ran into severe financial trouble in the future due to a cyberattack, a government penalty, or a decline in its revenue. Would the holdings of Bitcoin ETFs be safe? 

There are mechanisms by which ETFs and investors could recover their holdings in the event of a Coinbase bankruptcy, but they would only sometimes be instant or automatic. So custodianship risk may be something to consider while shopping for a spot Bitcoin ETF.

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Bitcoin Magazine Pro offers a comprehensive set of Bitcoin analytics tools designed to help investors and enthusiasts better understand Bitcoin through data. The platform provides a wide range of free, regularly updated Bitcoin charts, each accompanied by detailed explanations to make complex information accessible. 

For those looking to go deeper, paid tiers offer features like:

• Chart alerts
• Exclusive indicators
• In-depth market reports

Whether you're a curious Bitcoin investor wanting to grasp the factors influencing Bitcoin's price, or an analyst eager to expand your knowledge, Bitcoin Magazine Pro aims to provide clarity and insights to support more informed decision-making in the Bitcoin space. 

Save 30% on Bitcoin Magazine Pro's Bitcoin analysis tool today when you sign up on our annual plan!