Bitcoin, Ether Spot ETFs See First Inflows Since April

Bitcoin (BTC) spot ETFs have attracted over $34mn in inflows so far this month, as of 9 Jul, while Ether (ETH) spot ETFs have brought in about $110mn, according to SoSoValue data. The gains mark the first positive flows into both products since the first week of May. 

The inflows have coincided with a rebound in crypto prices. Bitcoin (BTC) has risen 9% since the start of July to around $64,100, while Ether (ETH) has gained 14% to $1,800 as of 17:18UTC.

The recovery follows nearly two months of withdrawals. Bitcoin spot ETFs recorded $4.51bn in outflows in June after losing $2.43bn in May. Meanwhile, Ether spot ETFs saw $529mn leave in June following nearly $541mn of outflows in May.

Assets recovery

Trading activity has also remained strong during the rebound with Bitcoin spot ETFs having traded about $11.5bn so far in July after recording $55.8bn in June. Ether spot ETFs traded $2.8bn this month following $12.7bn in June.

BlackRock remains the largest issuer in both markets with its iShares Bitcoin Trust (IBIT) managing $46.3bn in assets, or around 61% of all US spot Bitcoin ETF assets, and its iShares Ethereum Trust (ETHA) managing $4.8bn, accounting for more than half of US spot Ether ETF assets, according to SoSoValue.

Recovery may be early

The rebound in ETF flows has come alongside a wave of short liquidations in derivatives markets. This forced traders who had bet on lower prices to buy back their positions as Bitcoin rallied from below $59,000 at the start of July to above $64,000.

Adam Haemms, Head of asset management at Tesseract Group, said in comments shared with Sandmark that spot ETF investors have helped stabilize the market following the sell-off in late June.

"Spot ETFs and allocators are a larger share of the marginal buyer and flows have repaired from late-June stress, so a steadier base is absorbing the shock, even if part of the bounce has been short covering rather than fresh conviction," Haemms said.

Closing bearish positions

Jasper De Maere, OTC Trader at Wintermute, said in a market outlook shared with Sandmark that recent price gains may also reflect traders closing bearish positions rather than new buying.

"Looking underneath all of this, we have to note that open interest is falling as price recovers, pointing to the recovery also being supported by short-covering into an illiquid market more than fresh conviction buying," De Maere said in a market update.

De Maere added that "the mechanical support of short covering is not any validation of fresh capital flowing in, which, as mentioned before, is a prerequisite for a structural recovery in the market."

Haemms also warned against treating the recent rebound as the start of a longer trend. "I would be cautious, though, about reading one clean episode as a change of regime," he said, adding that investors should continue watching ETF flows, interest rate expectations, funding, liquidations and US spot demand.

Geopolitical tensions

While it is still too early to say whether the recovery will last, the return to positive ETF flows suggests investor sentiment is improving. Still, Haemms said investors should remain cautious as tensions in the Middle East continue to create uncertainty in global markets.

"Geopolitical headlines tend to move Bitcoin on the day without setting the regime, and this episode fits that pattern," Haemms said, referring to the market reaction after the ceasefire between US and Iran was declared "over" by President Donald Trump on 9 Jul.

He said Bitcoin continued to trade more like a risk asset than a safe haven these past few weeks, adding that the market had been buoyed by expectations that US interest rates may remain lower for longer and by improving ETF flows.

"The other support is the holder base. Spot ETFs and allocators are a larger share of the marginal buyer and flows have repaired from late-June stress, so a steadier base is absorbing the shock, even if part of the bounce has been short covering rather than fresh conviction," Haemms added.