Bitcoin ETF analyst James Seyffart from Bloomberg argues that days with zero inflows into exchange-traded funds (ETFs) are a common occurrence and shouldn't be interpreted as a failure of the product itself. According to Seyffart, it's typical for the vast majority of U.S. ETFs to experience zero inflows on most days, a pattern observed across various industries. Out of approximately 3,500 ETFs in the U.S., nearly 2,903 had zero flows on a recent trading day.
Concerns have been raised about low inflows into U.S. Bitcoin ETFs, with BlackRock's Bitcoin ETF being the only one to witness inflows on consecutive trading days. Seyffart dismisses these concerns, attributing the lack of inflows to the specific mechanics of how new inflows are recorded. He explains that for an ETF to register new inflows or outflows, there must be a significant disparity between supply and demand, justifying the creation or destruction of new fund shares known as "creation units."
Creation units, which are lots of ETF shares created and redeemed, vary in size for different ETFs, ranging from 5,000 shares to 50,000 shares for spot Bitcoin ETFs. Seyffart emphasizes that mismatches between supply and demand need to be substantial enough to warrant the development of the underlying market, exceeding the units created.
Data from Farside Investors indicates net outflows from Bitcoin ETFs, with the Grayscale Bitcoin Trust (GBTC) experiencing significant selling compared to inflows into new funds. On April 16, Bitcoin ETFs saw net outflows of $58 million, led by GBTC with $79.4 million, while the BlackRock iShares Bitcoin ETF (IBIT) saw the largest inflows at $25.8 million. Some ETFs, including those from Bitwise and Invesco Galaxy, reported zero new inflows.
Recent net outflows from Bitcoin ETFs coincide with geopolitical tensions in the Middle East and the upcoming Bitcoin halving event scheduled for April 20. Despite the short-term fluctuations, Seyffart remains confident that the occasional absence of inflows into ETFs is a normal part of their operation and doesn't reflect underlying issues with the products themselves.
