The rapid outflow of Bitcoin investment funds appears to be slowing after analysts pointed to massive withdrawals as the catalyst for BTC’s 2023 decline.
TLDR
- JPMorgan analysts believe the conversion of Grayscale’s GBTC into an ETF is likely to have ended most of the selling pressure on the Bitcoin price.
- GBTC has recorded $4.3 billion in outflows since becoming an ETF, which JPMorgan said has caused the price of Bitcoin to fall 20% to below $40,000.
- However, GBTC outflows declined to $394 million on January 25, the second lowest on record.
- Meanwhile, other US Bitcoin spot ETFs recorded a record net outflow of $158 million on January 24th.
- According to technical analysis, the Bitcoin price faces resistance around $40,500 and would need to break above $42,000 to see strength again.
The U.S. Bitcoin spot exchange-traded fund (ETF) recorded a record net outflow of $158 million on January 24, the largest single-day withdrawal since several funds were launched this month. The biggest losers have been pioneers like Grayscale, which opened the floodgates by converting its popular Bitcoin Trust (GBTC) to an ETF structure.
GBTC has experienced $4.3 billion in outflows since converting to an ETF on January 11. JPMorgan analysts previously pointed to profit-taking and tax-related selling as investors withdrew money from the largest Bitcoin fund. Discounts to net asset value also encouraged withdrawals.
But the latest data suggests the tide may be turning. Outflows from GBTC decreased to $394 million on January 25, the second-smallest daily decline on record. This led JPMorgan analysts to predict the end of the sell-off that has rocked the price of Bitcoin over the past month.
Here is the Day 9 chart with all the data.
Day 9 was quite weak for Blackrock, at just over $66m.
Fidelity’s Outperformance: +$126m pic.twitter.com/2VzTpZWOKx
— BitMEX Research (@BitMEXResearch) January 25, 2024
“Most of the downward pressure on Bitcoin in that channel will be far behind us,” the analysts said. After plummeting below $40,000 due in part to the GBTC outflow, Bitcoin is stabilizing and is now preparing for a potential recovery.
Technical analysis suggests that Bitcoin faces resistance around $40,500 and would need to break above $42,000 for a clear bullish turnaround. It’s a battle between increasingly exhausted sellers and buyers struggling to regain control of the market.
Other cash ETFs, such as Fidelity and BlackRock, saw mixed demand. Fidelity’s fund added 3,170 BTC on January 24, while BlackRock’s flagship fund suffered its lowest inflow since launch. But their assets under management remain strong, at nearly $3 billion combined.
The worst of GBTC’s downturn is clearly over, and analysts are hoping that funds will stabilize and new institutional investments will be made to restore Bitcoin’s upward momentum. But technical headwinds persist and buyers have yet to return with confidence. The next few weeks will be critical in determining whether the bearish period for BTC and the broader cryptocurrency market is actually coming to an end.