February 2, 2024
Greg Cipolaro

Research Weekly - ETFs Swing to an Inflow as Kinks are Worked Out


  • The spot ETF complex flips to net inflows this week as GBTC outflows level off but have yet to wind down.
  • The kinks in the ETF complex seem to be getting worked out according to one important metric.
  • Traders are showing a preference for trading spot ETFs over the underlying spot markets compared to the futures-based ETFs and underlying futures market.

Challenger Inflows Overwhelm Grayscale Outflows

The action in the ETF landscape continued again in the third week, bucking the trend of ETF launches settling down after the first few trading days. This week saw a flip in net flows for the total complex, from net outflows to net inflows. The redemptions of the Grayscale Bitcoin Trust (GBTC) have leveled off and are now being more than made up by inflows into the 9 new challenger funds. Net cumulative inflows into the spot ETF complex now stand at $1.5B, ahead of the $1.3B flows into BITO at the same point of its launch, but still below the $2.0B raised at a similar point for GLD.

Weekly 1-Feb-02-2024-07-24-58-7813-PM

GBTC Daily Outflows Have Leveled Off, But Have Yet to Cease

The market breathed a sigh of relief at the end of last week as the outflows from GBTC, which many had seen pressuring spot markets, began to slow. And while the data shows that outflows are well down from the daily peak $641M, money continues to flow out of GBTC to the tune of about $200M per day. This daily outflow has leveled off, but it has yet to see a complete wind down. While it helps spot price that inflows into challenger ETFs are now greater than GBTC’s outflows, it looks premature to call a complete cessation to the GBTC outflows. Since the conversion to an ETF, GBTC has seen redemptions for a cumulative total of $5.8B, about 20% of the $28.6B AUM it had at the onset.

BlackRock Surges Ahead of the Pack

Since the beginning of spot ETF trading, two players have been neck and neck in the race to catch Grayscale’s massive AUM lead: BlackRock’s iShares Bitcoin Trust and the Fidelity Wise Origin Fund (Satoshi Nakamoto roughly translates to “Wise Origin”). While BlackRock had consistently held a slight edge over Fidelity, on Thursday things changed when Fidelity’s inflows dropped from its $175M per day average to just $35M, while BlackRock saw another $164M of inflows. It’s too early to consider this slowdown for Fidelity a trend, but it certainly opens some “daylight” between the top two challenger funds. BlackRock’s AUM has now topped $3.0B while Fidelity sits at $2.6B. Ironically, even with the $1.5B of net inflows into the spot ETF complex, total AUM for the 10 funds including GBTC stands at $28.1B, which is below where just GBTC was before start of ETF trading.  

Weekly 3-Feb-02-2024-07-02-31-4285-PM

ETF Kinks Being Worked Out

The peculiarities of the spot ETFs, notably the cash create/redeem mechanism for Authorized Participants (AP), which require a third-party Liquidity Provider (LP) for the bitcoin leg of trading, had a noticeable impact on the ETFs at the onset of trading. This friction, along with other operational and settlement complexities, caused the ETFs to trade at values that differed greatly from their net asset values (NAV). The ETFs which have only seen inflows, the 9 challenger ETFs (represented below by IBIT and FBTC), traded at significant premiums to NAV, while GBTC, which has seen only outflows, traded at a discount to NAV. However, those differences have narrowed over time, indicating that these initial kinks have been largely worked out.  

Weekly 2-Feb-02-2024-07-25-18-7907-PM

Early Data Show Signs of Preference to Trade Spot ETFs vs Underlying, Whereas the Case is Reversed for Futures ETFs

Spot ETF volumes have traded a higher share of the underlying spot market compared to futures-based ETFs and the underlying futures market. This is a measure of success of the spot ETFs to us and indicates investor preference to trade the spot ETFs over the underlying spot markets whereas in the case of futures and the futures ETFs, the preference is reversed. Investors seem to prefer the underlying futures markets as opposed to the futures ETF. This data is still early, and the number of exchanges, while encompassing many of the major players (Binance, Bitfinex, Bitstamp, Coinbase,, Gemini, Huobi, itBit, Kraken and OKX), is not completely exhaustive. However, the share of ETF volumes to spot volumes would be even higher when considering just the onshore exchanges accessible to US investors.

Weekly 4-Feb-02-2024-07-03-57-9496-PM

Market Update

Weekly Market-Feb-02-2024-06-48-16-1951-PM

Bitcoin’s price rallied back this week as fears of over overwhelming GBTC outflows subsided. As our analysis above indicates, GBTC outflows haven’t ceased entirely, but seems to have plateaued to a level so that it is more than offset by flows into the challenger ETFs. Stocks had a mixed week, with the S&P 500 up 0.3% and Nasdaq Composite down 0.9%. Comments from Fed Chair Powell indicated a March rate cut expected by the market was not on the table, sending risk assets tumbling on Wednesday. However, the sell off was short lived as both the S&P 500 and Nasdaq Composite have recovered their FOMC-induced losses and then some. For bonds, while they were up on the week, they are now lower than levels before the FOMC meeting. Investment grade corporate bonds were up 1.7%, high yield bonds were up 0.3%, and long term US Treasuries were flat. Gold rallied 1.7% while oil prices fell 4.6%.

Of additional importance this week was the precipitous fall in the shares of New York Community Bancorp (NYCB), which was negatively impacted by rising loan loss provisions on its office and commercial real estate loan book. It was barely a year ago when the banking industry was gripped by the failures of Silvergate, Signature, Silicon Valley, and First Republic. Today, the issues facing NYCB (credit risk) seem to be very different than the ones confronted by the industry a year ago (interest rate risk), but this is certainly something to keep an eye on. As a reminder, bitcoin performed well against the backdrop of the regional banking crisis a year ago.  

Important News This Week


Analysts Predict Charles Schwab Will Eventually Offer Its Own Bitcoin ETF - The Block

FTX Is Unloading Crypto to Raise Cash and Pay Back Customers - Bloomberg

ARK Invest Says Optimal BTC Portfolio Allocation for 2023 Was 19.4% - CoinDesk

ARK Big Ideas 2024 Report - ARK Invest (Bitcoin begins on page 34)

Regulation, Enforcement, and Taxation:

FTX’s Missing Funds Were Stolen in SIM-Swapping Hack, DOJ Says - Bloomberg

Indictment in FTX SIM-Swap Hack - Ars Technica

Three Individuals Charged for Roles in $1.89B Cryptocurrency Fraud Scheme - DOJ

Foreign National Charged for International Money Laundering Conspiracy and Role in Operation of Unlicensed Digital Currency Exchange BTC-e - DOJ


Bitcoin-Based DEX Portal Raises $34 Million In Seed Funding - The Block

Celsius' Bitcoin Mining Assets to Restart Under Ionic as the New Unit Prepares to Go Public - CoinDesk

Binance Launches Marketplace for Inscription Tokens - The Block

Bankrupt Genesis Settles SEC Lawsuit Over Gemini Earn Program - The Block

FTX Expects to Repay Customers in Full, Bankruptcy Lawyer Says - Bloomberg

Alan Howard Shops His Own Crypto Stakes to Grow Brevan Howard Digital - Bloomberg

Upcoming Events

Feb 13 - January CPI reading

Feb 15 - End of comment period for options on bitcoin ETFs

Feb 23 - CME expiry

April 21 - Bitcoin block reward halving

This report has been prepared solely for informational purposes and does not represent investment advice or provide an opinion regarding the fairness of any transaction to any and all parties nor does it constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy. Charts and graphs provided herein are for illustrative purposes only. This report does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of New York Digital Investment Group or its affiliates (collectively NYDIG).It should not be assumed that NYDIG will make investment recommendations in the future that are consistent with the views expressed herein, or use any or all of the techniques or methods of analysis described herein. NYDIG may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this report.The information provided herein is valid only for the purpose stated herein and as of the date hereof (or such other date as may be indicated herein) and no undertaking has been made to update the information, which may be superseded by subsequent market events or for other reasons. The information in this report may contain forward-looking statements regarding future events, targets or expectations. NYDIG neither assumes any duty to nor undertakes to update any forward-looking statements. There is no assurance that any forward-looking events or targets will be achieved, and actual outcomes may be significantly different from those shown herein. The information in this report, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.Information furnished by others, upon which all or portions of this report are based, are from sources believed to be reliable. However, NYDIG makes no representation as to the accuracy, adequacy or completeness of such information and has accepted the information without further verification. No warranty is given as to the accuracy, adequacy or completeness of such information. No responsibility is taken for changes in market conditions or laws or regulations and no obligation is assumed to revise this report to reflect changes, events or conditions that occur subsequent to the date hereof.Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. Legal advice can only be provided by legal counsel. NYDIG shall have no liability to any third party in respect of this report or any actions taken or decisions made as a consequence of the information set forth herein. By accessing this report, the recipient acknowledges its understanding and acceptance of the foregoing terms.


Bitcoin for All.
Insights for You.

Subscribe now to learn what’s driving bitcoin markets, track significant regulatory developments, and get the data that deserves your attention.