On April 16, initial figures from Farside Investors indicated that four recently launched Bitcoin Spot ETFs experienced no trading activity.
These were Bitwise (BITB), Invesco Galaxy (BTCO), WisdomTree (BTCW), and Hashdex (DEFI).
Moreover, there were withdrawals of approximately $79.4 million from Grayscale’s GBTC and around $12.9 million from ARK 21Shares’ ARKB.
Nevertheless, Bloomberg ETF analyst James Seyffart said this was perfectly normal.
For everyone contacting us with concerns about the issue where an excessive number of flows cannot equal zero: This occurrence seems implausible to you. Check out this discussion initiated by @JSeyff in the following thread for more context.
Bitcoiners clearly do not understand ETFs, we are so early…
— Farside Investors (@FarsideUK) April 16, 2024
Why Zeros Don’t Matter
April 16 saw Seyffart stating that most Exchange-Traded Funds (ETFs) typically have a daily net inflow or outflow amount of zero. He considered this a regular occurrence.
Approximately 3,500 Exchange-Traded Funds (ETFs) exist in the US market. On April 15, it was noted that 2,903 of these funds experienced no inflow or outflow of assets. Additionally, among the eleven newly introduced Bitcoin spot ETFs, nine, including Fidelity’s (FBTC), did not record any activity on that day.
Shares are generated or eliminated in batches called creation units, an occurrence that takes place when the market supply and demand aren’t balanced.
To warrant accessing the larger market beneath, the difference must be substantial. A larger disparity than what is contained in a single creation unit was mentioned by him.
Additionally, ETF shares are issued and redeemed through the use of creation units. The size of these creation units can vary among different ETFs. For instance, in the case of Bitcoin spot ETFs, each creation unit consists of between 5,000 to 50,000 shares.
In simpler terms, a new product or event can only come into being if there is a significant difference between what people want and what’s currently available, along with the production costs being less than the cost of using traditional methods to balance supply and demand.
Okay too many questions about #Bitcoin ETFs and zero flows — a few quick thoughts:
Most ETFs in the US (approximately 3,500) experience no net inflow or outflow on an average day – this is typical behavior. Yesterday, about 2,903 of these ETFs did not experience any change in their assets.
— James Seyffart (@JSeyff) April 16, 2024
Third Day of Outflows
In simpler terms, Seyffart explained that small discrepancies between buying and selling shares won’t require special intervention from market makers. But when there’s a significant imbalance – more than just one creation unit’s worth – market makers will engage the underlying market to restore balance.
In other words, substantial discrepancies between the value of derivatives and their underlying assets result in notable transfers of that asset. Conversely, minor differences lead to no movement.
Despite three consecutive trading days with a net withdrawal of approximately $58 million from Bitcoin spot ETFs on April 16, it was primarily driven by small inflows into BlackRock’s IBIT and substantial outflows from GBTC and ARKB.
During the Asian trading session on Wednesday, Bitcoin (the underlying asset) regained a small amount of its value and reached $64,000 again. However, it lost ground in the subsequent hours.
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2024-04-17 14:56