Published at Theya Research. Follow Joe on X.
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Cliff-Notes:
- Bitcoin ETFs saw their largest-ever single-day net inflow of 17,880 BTC worth $1.35 billion, surpassing the prior record by 4,100 BTC and equating to 33 days’ worth of newly mined bitcoin.
- Demand for bitcoin from ETF investors—absent last cycle—has emerged as a significant and consistent driver, distinguishing it from other assets, with BTC ETFs outperforming Ether ETFs in both spot and AUM performance.
- Since July, Ether ETFs have struggled, with their AUM down 37.5% relative to Bitcoin ETF AUM, underscoring a broader reassessment of non-BTC assets post-FTX collapse and highlighting the continued appeal of bitcoin as a robust hedge in investment portfolios.
The ETFs bought 17,880 BTC worth $1.35 billion yesterday. For reference, that is 33 days' worth of new bitcoin mined. US-based ETF investors are buying bitcoin at a 33x-higher rate than new bitcoin is being mined—and this is just one of many cohorts of investors who were not around last cycle. This is the largest net inflow ever by ~$192 million.
When measuring in BTC, Thursday's inflow was 17,880 BTC, beating the prior record from March 12th—when bitcoin reached its prior ATH—by 4,100 BTC.
ETF investors did not have access to bitcoin last cycle. Their demand has proven to be one of bitcoin's largest and most reliable sources of buying, and will continue to be a force that drives price in a big way as retail comes onto the scene and the bull market ramps up:
What's more, bitcoin continues to outperform Ether in both the spot and ETF markets. Since November 2022, ETH/BTC, a gauge of "crypto" strength relative to BTC, has dropped from 0.075 to 0.038, a 49% decline. This is atypical for bull markets, where non-BTC assets typically outperform given their higher beta. It signals a reassessment of value in this space post-FTX collapse.
The value proposition of ETH, and by extension all non-BTC assets, has faltered, as reflected in this pair's performance. This is a positive shift, as the dominance of these non-BTC schemes has deterred many investors, wary of falling victim to yet another collapse:
Since the Ethereum ETFs launched, they have not been in very high demand. In fact, they are performing worse relative to bitcoin in the ETF market than ETH is performing relative to BTC in the spot market.
Ether ETF AUM relative to Bitcoin ETF AUM is down 37.5% since they launched in July, compared to spot Ether relative to spot Bitcoin which is only down 27.3% in the same period.
The spot Ether ETFs are falling flat on their face as financial advisors and other ETF customers see no value proposition compared to bitcoin. FAs are continually rotating their clients into the spot BTC ETFs, as it has had a 15-year track record of serving as an excellent hedge against monetary inflation—which clients are increasingly wary of—and continues to prove traditional markets pundits wrong by breaking through new all-time highs, unlike non-BTC assets, even after the various exchange collapses in 2022 and the negative press it has received since.
The differentiation between bitcoin and everything else is being priced in:
This is a view of the Ether ETFs' dismal performance, with daily flows by vehicle in the top pane and AUM in the bottom pane. AUM is down $2.2 billion since launch, compared to the spot bitcoin ETFs which have taken in a net $3.5 billion in the first week of November alone. Night and day:
Let's go back to the bitcoin ETFs and discuss where we are headed.
As bitcoin continues to perform well over the next year thanks to its most favorable macro backdrop since 2020 (post coming on Monday), financial advisors will continue adding it to clients' portfolios, while retirees and solo ETF investors do the same. Spot BTC ETF inflows will continue to accelerate.
Gold ETFs saw fewer than $2 billion in net inflows during their first year, and rose to ~$19 billion in annual inflows by year 6. For reference, YTD net inflows to the bitcoin ETFs have been well over $25 billion. If bitcoin can follow the path laid out by gold and increase its yearly net inflows by a few orders of magnitude, we'd very quickly see hundreds of billions of dollars pouring into bitcoin via these spot ETFs every year. Given that bitcoin is a $1.5 trillion asset, the price implications for such inflows are staggering.
Through the end of the year and into next, with a dovish Fed, an expanding economy, and investors moving out on the risk curve, bitcoin stands to be the beneficiary of financial advisors increasingly stepping up their allocations and rebalancing their portfolios to include more BTC ETFs as its price ratchets higher.
Now that bitcoin has decisively broken out of its range, the sky is the limit. Bitcoin has not spent 8 months basing at all-time highs just to stop now. The wariness investors felt about the US election is behind us, and in its place is a renewed fervor about the US growth outlook heading into a second Trump administration.
Bitcoin is now in price discovery. A tentative price of $90,000 per bitcoin is in play in relatively short order, off of the basic technical assumption that the move out of the range will be roughly equivalent to the size of the range. After a reprieve there, it will be time to reassess and evaluate where we are heading after that.
Everything we've been talking about for several months on end is finally coming to pass. Strap in and enjoy the ride.
Take it easy,
Joe Consorti
Theya is the simplest way to take full control of your bitcoin. With our flexible multi-sig vaults, you decide how to secure your keys.
Whether you prefer keeping all keys offline, shared custody with trusted contacts, or robust mobile vaults across multiple devices, it's always Your Keys, Your Bitcoin.
