Open Editor's Digest for free
Rula Khalaf, editor of the Financial Times, picks her favorite stories in this weekly newsletter.
Bitcoin has fallen 16 percent from its all-time high last week, as the influx of investors into new stock market funds that led to a huge rally this year reversed.
The world's largest cryptocurrency, which hit $73,800 last Thursday, fell to a low of $60,760 on Wednesday before recovering to just under $63,000.
Its decline comes as outflows from 11 new Bitcoin exchange-traded funds reached nearly $500 million in the past two days, according to data compiled by CoinShares, an asset management group. The largest outflow was into Grayscale, the largest bitcoin ETF, which had more than $1 billion withdrawn from its fund this week.
Bitcoin has soared to record levels this year after US regulators approved bitcoin ETFs in January after a decade of rejection. Money has surged into some new funds, and BlackRock's Bitcoin ETF was the fastest ETF in history to reach $10 billion.
“The fact that there are regulated entities providing investment options in bitcoin is something that gives investors confidence, but it does not change the fundamental nature of bitcoin itself,” said Laith Khalaf, head of investment analysis at investment platform AJ Bell in London.
“Bitcoin does not have any fundamentals that provide an anchor to the price, making it more vulnerable than other assets to significant fluctuations,” he added. “There's nothing there that you can use as a rubric.”
The flow of money into new ETFs has been curtailed since January due to ongoing outflows at Grayscale, which has withdrawn more than $12 billion since the Securities and Exchange Commission agreed to convert its bitcoin fund into an ETF.
On Wednesday, there were another $444 million in outflows, according to Bloomberg data. Grayscale has priced its ETF fees at 1.5 percent, in contrast to competitors such as BlackRock, Fidelity, Ark Investment and Bitwise, which have reduced or temporarily waived fees to attract new clients.
BlackRock, the most successful of the new ETFs, had $527 million in inflows this week, but other funds, such as Invesco, Franklin Templeton, and Valkyrie, had negligible inflows.
“There has been a flight to other ETFs due to some of the flaws in the Grayscale product, but this is just a minor price correction,” said Joel Krueger, market strategist at LMAX. “This setback is a far cry from any panic, anxiety or concern about Bitcoin experiencing some kind of severe decline.”
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”