Key Points
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Investors pulled more than $4 billion out of Bitcoin ETFs in June.
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While Bitcoin ETF outflows are important to monitor, so are purchases by Bitcoin treasury companies.
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Currently, Bitcoin ETFs hold 5.75% of all Bitcoin in circulation.
- 10 stocks we like better than Bitcoin ›
One of the most important indicators for tracking the future price of Bitcoin (CRYPTO: BTC) — the flows into and out of the spot Bitcoin ETFs — is now flashing bright red. In June, Bitcoin ETFs had their worst month ever, as investors pulled out $4.3 billion.
Even worse, this was not just a one-day phenomenon. Steady outflows occurred on 19 of the 22 possible trading days in June, the sign of a much broader sell-off in Bitcoin.
If you’re thinking about investing in Bitcoin, this is obviously a source of much consternation. But there’s a good reason to think that this is just a short-term blip on the radar and not a long-term cause for concern.
There’s more to Bitcoin than just the ETFs
Yes, the Bitcoin ETFs are an important part of the Bitcoin investment story. But there are plenty of ways to get exposure to Bitcoin these days, and investors don’t need to buy the ETFs. Most obviously, investors can buy Bitcoin directly on a cryptocurrency exchange.
Steady buying on a crypto exchange such as Coinbase Global will not appear in ETF inflows and outflows. That’s a point Coinbase has been making recently as it sees renewed interest in Bitcoin from institutional investors.
Just take a look at the numbers. Total assets under management (AUM) for the spot Bitcoin ETFs are now $75 billion. That’s a huge number, but it’s nowhere close to the $1.2 trillion market cap of Bitcoin. The top Bitcoin ETF, the iShares Bitcoin Trust, holds just 3.5% of all Bitcoin in circulation. All combined, the Bitcoin ETFs hold just 5.75% of all Bitcoin.
Arguably, the biggest Bitcoin treasury companies are now just as important as the Bitcoin ETFs. For example, Strategy, formerly known as MicroStrategy, now holds more than 4% of all Bitcoin in circulation. As long as companies such as Strategy can pick up the slack, any outflows from the Bitcoin ETFs could be offset.
Where does the price of Bitcoin go from here?
The Bitcoin ETF outflows were big news in June, primarily because the price of Bitcoin was tanking. For the month, Bitcoin fell more than 20%. So the narrative began to build that ETF outflows were leading to a decline in the price of Bitcoin.
But what if it’s the other way around? In other words, the price of Bitcoin was tanking in June, so ETF outflows were accelerating in response. This makes more sense, given how institutional buyers are likely to adjust their portfolios in response to new macroeconomic data.
Thus, as soon as the price of Bitcoin stabilizes, the ETF inflows will likely return. If the Bitcoin bottom is really in, as a growing number of analysts seem to think, then this could occur much sooner than anyone thinks. For that reason, I’m not worried about Bitcoin right now.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and iShares Bitcoin Trust. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.
