Bitcoin held by the fund is at the lowest level since October 2021 | coindesk JAPAN | Coindesk Japan

Bitcoin (BTC) funds are draining coins as speculation that the Federal Reserve (Fed) is leaning toward easing liquidity sooner after an American bank failure.

According to data from ByteTree Asset Management, the number of coins held by exchange traded funds (ETFs) specializing in closed-end funds, spots and futures in Europe, the United States and Canada this month reached 16,560 BTC ($409 million, about 54.4 billion yen) to a 17-month low of 826,113 BTC.

Investing vehicles like ETFs that allow exposure to Bitcoin without owning a crypto asset (virtual currency) are widely considered a proxy for institutional investor activity.

The decline in balances suggests that institutional investors are not participating in Bitcoin’s recent rally, which has been attributed to renewed safe-haven demand and hopes of a Fed rate cut later this year. Some observers say the rise is evidence of Bitcoin’s growing appeal as a hedge against the banking system.

Bitcoin saw strong buying near $19,600 late March 10 after Silicon Valley Bank, once one of the top 20 financial institutions in the United States, shut down. The price has since risen more than 25%, hitting a nine-month high of $26,501 on Wednesday, according to CoinDesk data.

Bitcoin funds are draining money again. (ByteTree)

“Financial institutions are not buying into the narrative that BTC is really going to stay here,” Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk. “Globally, the wealth management industry is a very thin business for both Bitcoin and gold.”

But Morris cautioned against drawing conclusions from the data, saying that large outflows from one fund were the main reason for the lower numbers.

Also, a decline in fund holdings does not necessarily mean that price appreciation is weak or unsustainable. Matrixport’s head of research and strategy Markus Thielen said the fund’s holdings accounted for a small percentage of the total market and that other sources of demand were pushing prices higher.

“Fund holdings data is irrelevant. I suspect USD coin (USDC) holders are converting their stablecoins into BTC,” said Thielen. Binance recently announced that it will convert $1 billion worth of funds held in Binance USD (BUSD) into Bitcoin, Binance Coin (BNB) and Ethereum (ETH).

｜Translation: coindesk JAPAN
｜Editing: Toshihiko Inoue
｜Image: Shutterstock
｜Original: Bitcoin Held in Funds Drops to Lowest Since October 2021, ByteTree Data Shows