Bitcoin ETFs Record Largest Outflows Since June
US-listed Bitcoin exchange-traded funds (ETFs) recorded their largest weekly outflows since late June, signaling a return of caution among institutional investors toward the largest cryptocurrency.
The 13 US funds registered net outflows of approximately $390 million last week, following inflows of more than $853 million in the previous week, which had been the highest since April.
The shift comes as Bitcoin traded near $63,000, down nearly 50 percent from its all-time high recorded in October.
Rashid Al-Khazaie, Director of Digital Assets at TDR, stated that recent movements in the Bitcoin market are not primarily driven by cryptocurrency-specific factors or technical indicators, but are instead more significantly influenced by traditional market fundamentals and institutional liquidity flows across various asset classes.
In an interview with Al Arabiya Business, Al-Khazaie explained that the outflows from Bitcoin ETFs reflect a greater need for liquidity in other markets. He noted that investors, particularly institutions and US investors, are currently grappling with a range of concerns related to traditional markets, foremost among them movements in the Japanese yen and risks associated with carry trade deals.
He added that it is notable that the wave of outflows from Bitcoin ETFs occurred at a time when global financial markets are experiencing exceptional volatility, with strong moves in gold, oil, and equities, alongside rising volatility levels in the VIX index and other markets.
He pointed out that Bitcoin, by contrast, is currently undergoing a phase of relative stability, trading within a narrow price range not exceeding approximately $5,000.
Al-Khazaie clarified that Bitcoin has been trading for about two months, and may be approaching its third month, within a range of roughly $60,000 to $65,000, reflecting a state of price coherence.
He believes that Bitcoin’s ability to maintain this stability amid the significant volatility seen in various global markets could be an important indicator of the evolution of its status within the economic cycle.
He added that the persistence of this coherence under current conditions could strengthen Bitcoin’s position and status as an asset within the broader economic cycle, considering that this may support its prices and drive them higher from current levels through the end of the year.
He views that artificial intelligence could draw away some of the attention and momentum that cryptocurrencies enjoyed in recent years, noting that the rapid spread of AI and the surrounding buzz may lead to a decline in the hype associated with cryptocurrencies as a whole.
He explained that AI has now become part of the investment landscape, while cryptocurrencies and new financial innovations occupy another segment, as most innovations and technologies attracting market interest are increasingly linked to artificial intelligence.
However, Al-Khazaie simultaneously rules out that this represents a real threat to the fundamental infrastructure of the Bitcoin network.
He emphasized that converting Bitcoin mining into data centers for AI is not an easy process, noting that the infrastructure invested in the Bitcoin mining sector was not built solely by large corporations, but also involved a large number of individual investors and mid-sized and small investor groups spread across the globe.
He added that this wide geographic distribution makes it difficult to accurately determine the true cost of Bitcoin mining, particularly because electricity costs vary significantly from one country to another and from one region to another, thereby affecting both mining costs and profit margins.
Al-Khaza’ji pointed out that one of the key factors distinguishing Bitcoin is the nature of the system it is built upon, explaining that the currency operates on a deflationary or anti-inflationary model based on the continuous reduction in the amount of new supply that can be injected into the market.
He clarified that, in his view, Bitcoin represents the only scarce digital asset with a clearly defined technical cap on its supply, which limits the quantity of new Bitcoins that can enter the market according to the network’s rules.
He further noted that increases or decreases in mining power do not alter the amount of Bitcoin that can be injected into the market in the short term, nor do rising Bitcoin prices or lower mining costs lead to an increase in new supply beyond the limits set by the system.
Consequently, fluctuations in mining power affect miners’ economics and operational costs, but they do not result in an unlimited increase in the quantity of new Bitcoins entering the market.
He emphasized that this characteristic constitutes one of the fundamental elements supporting Bitcoin’s scarcity, as the supply remains constrained by the network’s software rules regardless of demand levels or mining costs.
Regarding the possibility that miners might hold large quantities of Bitcoin that could be sold suddenly, Al-Khaza’ji noted that while some miners do hold Bitcoin reserves, an analysis of major miners’ wallets does not, in his assessment, indicate sufficient quantities that could suddenly flood the market.
He explained that miners’ balances do not appear to be at levels that raise concerns about a massive sell-off capable of overwhelming the market with new supply and driving prices down sharply.
He believes that the limited nature of Bitcoin’s supply, combined with the fact that major miners do not hold large quantities available for sudden sale, limits the likelihood of a significant supply-side shock and enhances the market’s ability to absorb current movements.
