What’s going on here?
Investors pulled $1 billion out of bitcoin exchange-traded funds (ETFs) on Tuesday, the biggest-ever one-day recoil.
What does this mean?
Investors pulled $2.1 billion out of bitcoin ETFs in the last week, elbowing the OG crypto down to its lowest price since November’s rally started. Now it’s true, the crypto market is hardly immune to dramatic swings – it’s practically famous for them. But this one doesn’t look like a quick blip. Investors are running in one direction, rather than seizing the opportunity to buy bitcoin at a cheaper price. And unless the “buy the dip” die-hards start practicing what they preach, the digital coin could stay on the slide.
Why should I care?
For markets: We’ll always have November.
Bitcoin’s post-election rally was built on the belief that this administration would be kind to digital currencies, with some dubbing the new US leader as “the first bitcoin president”.
But any crypto-friendly changes have been overshadowed by threats of heavy tariffs, which undermined investors’ confidence in the broader economy and international relationships. After that sent the first droves toward the door, many newer investors – less accustomed to crypto’s mood swings – followed their lead. At the same time, hedge funds dialed back on basis trades. That’s a strategy where traders bank the difference between a futures contract and the underlying asset by buying one and selling the other. But when the gap between the two closed in, the strategy became less lucrative – so hedge funds shed their bitcoin ETF stashes, stat.
Zooming out: Safety is sexy.
This isn’t just a bitcoin issue: investors have been turned off by all sorts of risky assets. They’ve ditched leveraged ETFs – which use debt or contracts to amplify price movements – tied to the likes of Tesla and Nvidia, as well as Cathie Wood’s tech-heavy ARKK fund. Instead, they stuffed nearly $7 billion into more traditional stock ETFs this week, namely the S&P 500 and Nasdaq ones.
