Bitcoin experienced a solid rally of 67.0% during the quarter, marking as one of its most impressive first quarters to date, the team at NYDIG noted in a new report.
This surge was primarily fueled by “the overwhelming demand for the recently introduced spot bitcoin ETFs,” the NYDIG research report stated.
The report added that despite a slow start that then flipped to outflows, both the spot ETFs and IBIT in particular, “have emerged as the top-performing ETF launches in history.”
The influx of retail and advisor interest, “previously hesitant to invest in spot bitcoin through alternative channels, has been the driving force behind this surge in demand.”
The report from NYDIG also mentioned that “most other asset classes performed well during the quarter as low unemployment, a strong economy, and inflation which, while not yet extinguished, is down well off the highs, provided a supportive backdrop for asset performance.”
The market has yet to get the interest rate cut “that it has desired as the market has been expecting interest rate cuts from the FOMC ‘6 months from now’ for over a year at this point.”
NYDIG are not convinced “that given the inflation numbers the FOMC will deliver on that expectation but given the performance in risk assets the past year, that doesn’t seem to be necessary for strong performance for bitcoin, stocks, gold, and real estate.”
The first quarter has historically “been good for bitcoin in terms of price performance and this year that trend has continued. Ranking as bitcoin’s fourth best first quarter ever and the second best since 2013, 1Q24 sets a positive tone for the year ahead.”
While the launch of ETFs provided “a significant boost, the upcoming halving will also play a crucial role in the price cycle.”
Although the supply reduction from the halving “is substantial (equivalent to 450 bitcoins/day or $31.5M/day at $70,000/BTC), it may not have the same impact as the surge in demand seen from the introduction of ETFs.”
The NYDIG report pointed out that Bitcoin’s correlations “with other major asset classes, such as stocks and the US dollar index, saw an increase (absolute values) from near zero levels at the end of 2023, but decreased in comparison to gold.”
NYDIG believe that the shift “doesn’t hold much significance, however, as Bitcoin’s 90-day rolling correlation has historically fluctuated between +0.3 and -0.3.”
The monetary and fiscal interventions “in response to the Covid-19 crisis altered Bitcoin’s relationship with other assets, but this change appears to have been temporary. With the era of money printing and rate hikes to combat inflation now in the past, Bitcoin’s long-term correlations are showing signs of reverting to their historical averages.”
Undoubtedly, the standout moment of the quarter was “the approval and introduction of spot ETFs in the US.”
According to the NYDIG update, it was an event filled “with unexpected twists and turns – a hack on the SEC’s twitter account prematurely announcing the approval, the approval coming right on the final decision deadline, initial inflows falling short of expectations, leading to outflows, and then a remarkable turnaround resulting in the strongest inflows ever seen in ETF launches. As we wrap up the first quarter, it’s clear that the ETFs, both collectively and individually, have been a resounding success.”
Given these developments, NYDIG has shared the end-of-quarter results on how the ETFs performed collectively and individually.
At a glance, all ETFs experienced inflows, “except for GBTC which showed only outflows, and BTCO which had redemptions on certain days, likely linked to Galaxy’s selling activities. ARKB had a single outflow on 4/2 (Tuesday), marking the first true outflow among non-GBTC and BTCO ETFs.”
Together, the ETF industry “saw a remarkable $12.1B in net inflows during the quarter. Interestingly, while GBTC faced outflows of $14.8B, the 9 “challenger” ETFs attracted a substantial $26.9B in net inflows. GBTC maintained its position as the leader in AUM, with BlackRock’s iShares fund (IBIT) following closely in second place, and Fidelity (FBTC) securing third place. Notably, crypto native companies, ARK 21Shares and Bitwise, claimed the 4th and 5th spots, showcasing impressive marketing capabilities. This success puts them ahead of well-established players like VanEck, Invesco, and Franklin Templeton.”
In the aftermath of the spot ETFs launch, “the resilience of BITO and other bitcoin-futures based ETFs has been a surprise.”
Despite BITO having a higher expense ratio (0.95%) compared “to spot ETFs (except GBTC), along with roll costs and tracking error to spot, investors have only redeemed $55.2M from futures funds.”
The recent closure of “the VanEck Bitcoin Strategy ETF (XBTF) was a casualty in the competitive ETF landscape, yet the bitcoin futures ETF category still boasts a substantial $3.1B in AUM.”
This highlights the value of investor recognition, “being a first mover, and the potential importance of derivatives markets, especially with spot ETFs still awaiting approval for options trading.”
