Bitcoin ETFs Have Maintained Over 95% of Their Invested Capital, Despite a Slowdown in Inflows and the Recent Significant Drop in Price

This resilience, comparable to that of traditional stock ETFs, reflects a change in the behavior of crypto investors.

Exchange-traded funds (ETFs) tracking Bitcoin (BTC) have managed to retain over 95% of their invested capital, even amid a slowdown in inflows and a recent 25% price decline, highlighting a shift in crypto investor behavior.

Still, U.S. spot BTC ETFs saw record outflows last week, and other indicators suggest more turbulence ahead.

ETFs hold strong despite Bitcoin woes

In a recent post on X, James Seyffart, senior ETF analyst at Bloomberg, shared an update on the state of Bitcoin ETFs.

According to his analysis, these funds have seen their new inflows slow down from a peak of $40 billion to about $35 billion.

However, with a total of $115 billion in assets under management (AUM), they have managed to retain more than 95% of their invested capital despite a significant 25% drop in the price of Bitcoin from its recent high.

This resilience in the face of market pressure is more commonly observed in traditional American stock ETFs.

During periods of bearishness, long-term investors do not panic and withdraw their capital. On the contrary, they continue to buy shares.

This signals a broader paradigm shift from a short-term speculative approach to a long-term wealth investment strategy, especially among retail investors.

But several indicators suggest more turbulence ahead for the crypto market.

U.S. spot Bitcoin ETFs saw capital outflows of $870 million last week and $1.6 billion over the past month, according to SoSoValue.

Other warning signals are emerging.

Darkfost, a contributor at CryptoQuant, highlighted a substantial drop in Bitcoin demand since December.

Analyzing the 30-day moving average of "apparent demand," which compares the new supply to BTC that has been inactive for over a year, shows a clear decline, indicating a decrease in the number of active buyers and a more cautious market.

Sharpe ratio drops for Bitcoin

Another analysis from Alphractal shows the Sharpe ratio of Bitcoin has been declining since March 2024.

This trend, which is unfolding despite Bitcoin reaching historical highs above $100,000, indicates an increase in risk per unit of return.

This deterioration can be attributed to several macroeconomic factors, such as inflation, interest rates, and geopolitical instability, which contribute to market uncertainty and volatility.

Additionally, the slowdown in short-term returns from Bitcoin price appreciation might also be contributing to the decrease in the Sharpe ratio.

Moreover, data from Santiment shows that large Bitcoin holders, in the bracket of 100 to 1,000 BTC, sold a total of over 50,000 BTC last week alone, which is valued at about $4.07 billion.

Bitcoin ETFs display remarkable resilience over short-term market pressures, yet multiple warning signals suggest turbulence in the coming months.

Investors now seem to be adopting a longer-term vision with wealth accumulation strategies, even as new uncertainties emerge.