Source: Cointelegraph Original: "{title}"
On October 14, the U.S. spot Bitcoin exchange-traded funds (ETFs) experienced the largest single-day inflow of funds in over 120 days.
With over $500 million pouring into these funds, the price of Bitcoin (BTC) surpassed $67,800, reaching its highest price in more than three months.
Nate Geraci, president of ETF Store, described this event as a milestone day for spot BTC ETFs, noting that net inflows into BTC ETFs have approached $20 billion over the past 10 months.
"This is just ridiculous, far exceeding pre-launch demand estimates. In my view, this is not 'degen retail' dollars. He wrote: "This is advisors and institutional investors slowly adopting Bitcoin."
The Fidelity Wise Origin Bitcoin Fund led the way with an inflow of $239.3 million, marking a new high since June 4. Following closely was the Bitwise Bitcoin ETF, with inflows exceeding $100 million, and BlackRock's iShares Bitcoin Trust with inflows of $79.6 million.
Similarly, the Ark 21Shares Bitcoin ETF saw inflows of just under $70 million, while the Grayscale Bitcoin Trust recorded its first inflow of $37.8 million in October, the highest since early May.
The recent surge in Bitcoin ETF inflows is attributed to a combination of factors, with some experts calling it a comprehensive "perfect storm" for cryptocurrency investment.
For instance, Chris Aruliah, head of institutional at cryptocurrency exchange Bybit, pointed out that the upcoming U.S. elections are a key driving factor, adding, "As the November U.S. elections approach, investors may feel more confident to place bets, and we will see the restoration of the Bitcoin bull market trend. Both sides of the U.S. elections have made positive statements about cryptocurrency, and there is also anticipation for regulatory clarity."
Likewise, Alicia Kao, general manager of cryptocurrency exchange KuCoin, told Cointelegraph that the increasingly optimistic macroeconomic outlook is another key factor driving this trend.
She believes that economic data released by U.S. institutions has alleviated concerns about a potential economic recession, and the Federal Reserve has begun to gradually lower interest rates.
Daily inflow of Bitcoin ETFs on October 14. Source: CoinGlass
Additionally, she noted that with increased regulatory clarity and the launch of global spot crypto ETFs, hedge fund participation in digital assets has been steadily rising.
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"Currently, nearly half (47%) of traditional hedge funds have ventured into digital assets, a significant increase compared to 29% in 2023 and 37% in 2022. Furthermore, 67% of hedge funds plan to maintain their current risk exposure to digital assets by the end of 2024, and 33% of hedge funds intend to increase their digital asset investments, indicating growing institutional confidence and driving substantial inflows into Bitcoin ETFs," Kao said.
Retail demand is undoubtedly an important factor, but the role of institutional investors in driving record inflows cannot be overlooked.
Mithil Thakore, CEO and co-founder of the Bitcoin trading protocol Velar, believes that institutional investors are the main force driving Bitcoin trading, with most of the Bitcoin purchased through ETFs being bought by institutional investors. He added:
Similarly, Ben Caselin, chief market officer of VALR, believes that the recent surge in inflows into U.S. spot Bitcoin ETFs can be attributed to Bitcoin's resilience in low and high-interest environments.
Moreover, he believes that institutional investors are increasingly entering this space, thereby driving inflows.
"Caselin said: "The participation of institutions such as financial advisors and pension funds is crucial for Bitcoin prices to reach new highs and potentially surpass gold, becoming an important asset class decoupled from traditional markets.
Kao stated that in the second quarter of 2024, the institutional adoption rate of Bitcoin ETFs surged by 27%, with 262 new companies entering the U.S. spot Bitcoin ETF market.
She noted that as of June 30, 2024, the total number of professional companies holding Bitcoin ETFs has exceeded one thousand. Despite the staggering numbers, Kao said: "Retail investors still remain the primary holders of Bitcoin ETFs. Institutional investors manage only 21.15% of the assets under management, a modest increase from 18.7% in the first quarter of 2024."
The success of Bitcoin ETFs, especially compared to traditional asset classes like gold, is remarkable. Eric Balchunas, senior ETF analyst at Bloomberg, pointed out that since the launch of Bitcoin funds in January, the asset has set five all-time highs.
Source: Eric Balchunas
While gold has set 30 all-time highs this year, the net inflow into gold ETFs has only been $1.4 billion, whereas Bitcoin ETFs have seen net inflows exceeding $20 billion.
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Caselin believes that while gold has a millennia-long history as a legitimate store of value, the modern digital age offers investors Bitcoin and all its unique advantages:
Aruliah believes that Bitcoin has become a brand new alternative asset class, distinctly different from precious metals but sharing many of the same characteristics.
Tristan Dickinson, chief marketing officer of the Bitcoin layer exSat Network, stated that Bitcoin ETFs have proven to be the most successful ETFs in U.S. history (whether cryptocurrency or otherwise) and are expected to significantly outperform gold ETFs. He attributes this rise to Bitcoin's unique characteristics, initial robust performance, high volatility, and enormous short-term profit potential.
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