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Why the Absence of Inflows in Bitcoin ETFs Isn’t a Cause for Concern

Zero inflows in ETF markets is a normality, and here is why

Amid fluctuations in the cryptocurrency market, industry expert James Seyffart clarifies why days with zero inflows for Bitcoin ETFs are a typical occurrence in the U.S. ETF landscape.

Key takeaways:

  • Zero inflows in Bitcoin ETFs align with broader trends across thousands of U.S. ETFs.
  • Recent market behaviors, including net outflows, reflect routine trading dynamics rather than fundamental issues with Bitcoin ETFs.

James Seyffart, a Bloomberg ETF analyst, emphasizes that experiencing days with zero inflows is a commonplace event across the ETF industry and is not unique to Bitcoin ETFs. In a detailed explanation via an April 16 X post, Seyffart notes: 

"On any given day, the vast majority of ETFs will have a flow number of ZERO — this is very normal. There are ~3,500 ETFs in the U.S. Yesterday 2,903 of them had a flow of exactly zero."

This statement comes in response to concerns regarding the apparent lack of new capital into U.S.-based Bitcoin ETFs, highlighted by the fact that BlackRock’s Bitcoin ETF was the only one to register inflows for two consecutive trading days this week — specifically between April 12 and April 15.

Insights into ETF mechanics and market dynamics

Seyffart clarifies that for an ETF to record new inflows or outflows, there must be a significant mismatch between supply and demand that justifies the creation or destruction of new fund shares, issued in "creation units." 

He explains: 

"This ONLY happens when there is a mismatch in supply [and] demand. And that mismatch has to be large enough to justify tapping the underlying market and a ~bigger mismatch than a creation unit."

Highlighting the operational specifics, he adds: 

"Every ETF can have a different-sized creation unit. In the case of the spot Bitcoin ETFs, they are blocks of shares ranging from 5,000 shares to 50,000 shares."

Recent market activity and outlook

Despite the normalcy of zero inflows, the last six trading days saw all ten U.S. spot Bitcoin products witness net outflows, predominantly led by selling from the Grayscale Bitcoin Trust (GBTC), which starkly overshadowed any inflows into newer funds. On April 16, Bitcoin ETFs recorded $58 million in net outflows, with GBTC alone accounting for $79.4 million in outflows and the ARK 21Shares Bitcoin ETF (ARKB) seeing $12.9 million. Conversely, the BlackRock iShares Bitcoin ETF (IBIT) experienced the largest inflows, totaling $25.8 million.

The market's recent downturn, with Bitcoin down 7.8% on the week to $63,723 according to TradingView, coincides with rising geopolitical tensions and the anticipation of the Bitcoin halving event slated for April 20, which are likely contributing to increased market volatility.