21 Jun 2022

Blood in the streets: Enormous redemptions in the Purpose BTC ETF – forced seller?

The largest Canadian bitcoin ETF, Purpose, saw its AUM plunge 50% on Friday, indicating a massive capitulation from a forced seller.
The Canadian Purpose ETF experienced massive outflows on Friday, amounting to 24,510 BTC on Friday. The fund’s bitcoin under management has fallen by 24,545 BTC since Thursday, equivalent to a 51% decline.This is by far the most severe redemption we’ve seen in the relatively short-lived BTC ETF history and has contributed to shrinking Purpose’s bitcoin under management down towards lows not seen since October 2021. The enormous outflows are likely caused by a forced seller in a huge liquidation. The forced selling of the 24,000 BTC could have triggered BTC’s move down towards $17,600 this weekend. In early June, we noted massive net inflows to BTC ETPs, but it’s safe to say that this plunge has offset all gains and more so. As of writing, BTC ETPs have seen net outflows amounting to 18,315 BTC. As of now, June 2022 has been the worst month in BTC ETP’s history related to outflows, outpacing the outflows experienced in April.Following these outflows, Purpose is no longer the largest BTC ETP provider in the industry. ProShares’ futures-based BTC ETF is now the largest exchange-traded bitcoin fund measured by AUM. In stark contrast to Purpose, BITO saw massive inflows last week.
… But someone is buying the dip?
ProShares’ BITO ETF saw its largest net inflows since its launch week last week, leading the funds’ bitcoin exposure to grow by 4,115 BTC.
Source: ProShares
Last week was a massive week for BITO, as the fund saw net inflows amounting to 4,115 BTC. This has pushed BITO’s bitcoin equivalent exposure to a new all-time high of 31,585 BTC. ProShares has become the largest bitcoin ETF provider after surpassing Purpose’s AUM during Friday’s redemption carnage in Purpose. Last week’s inflows are nearly as high as the monthly inflows to BITO in November and are the second-highest weekly net inflows to BITO, only surpassed by the massive 19,065 BTC equivalent inflows during the launch week. This suggests that at least some U.S. investors are eyeballing the current sell-off in BTC as an attractive point of entry, taking advantage of forced sellers elsewhere. However, the futures-based structure disincentivizes long-term exposure, suggesting that this is driven by short-term positioning for an expected relief rally. Today, ProShares will launch a short bitcoin ETF (BITI). Several have noted the timing of the BITO and BITI launches. Maybe this might contribute to breaking the BITO curse?
Source: Purpose, ProShares
I cover the growing discounts in Grayscale, and pending ETF verdict here.
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