Bitcoin

Gold

Spot

<h2 id="key-points">Key Points</h2>
<ul>
 <li>US spot Bitcoin ETFs might pose a risk to on-chain adoption and liquidity.</li>
 <li>Bitcoin ETFs have failed to attract baby boomers with the majority of BTC held by retail investors.</li>
</ul>
<p>Despite the potential to attract more baby boomers, US spot <a href="https://crypto.ro/en/cryptocurrencies/bitcoin/" rel="noopener noreferrer nofollow">Bitcoin</a> exchange-traded funds (ETFs) could pose a significant risk to on-chain adoption and liquidity.</p>
<p>There is a growing concern that ETFs could negatively impact on-chain liquidity. According to Jim Bianco, the founder of macro research firm Bianco Research, moving money off-chain into the traditional finance world could hinder the development of a new decentralized financial system.</p>
<h2 id="bitcoin-s-crucial-week">Bitcoin’s Crucial Week</h2>
<p>This warning comes at a critical time for Bitcoin’s price, which is currently trading below a key resistance line. If Bitcoin can break above the $67,500 mark, it could potentially reach new all-time highs, according to Markus Thielen, the head of research at 10x Research.</p>
<p>However, instead of promoting more adoption, ETFs appear to be moving on-chain liquidity into the traditional finance world. This concern has been a long-standing one for the macro researcher. This shift is demonstrated by Coinbase’s Q1 financial results, which showed a revenue of $1.64 billion despite retail trading volume being only half of 2021 levels.</p>
<h2 id="institutional-growth-and-retail-trading-decline">Institutional Growth and Retail Trading Decline</h2>
<p>Meanwhile, institutional trading volume rose to $256 billion in the first quarter from $215 billion in Q1 2021. According to Bianco, this indicates that Coinbase is balancing institutional growth to compensate for the decline in retail trading.</p>
<p>This situation may pose a challenging question for Bitcoin’s role as a decentralized alternative to the traditional fiscal system. If the goal is to establish a new financial system, an ETF that pulls money back into the traditional finance world is not helping to reach that goal.</p>
<p>Moreover, ETFs have not been successful in attracting baby boomers. Over 85% of the underlying BTC is held by retail investors, with only 10% held by hedge funds.</p>
<p>Despite assurances that baby boomers are interested in Bitcoin, this does not appear to be the case for the majority of Spot BTC ETF holdings.</p>
<p>Inflows from the US Bitcoin ETFs turned positive in the week of May 6, following three weeks of net negative outflows. The US Bitcoin ETFs gathered over $200 million worth of cumulative net inflows during the past week.</p>
<p>The average purchasing price of the spot Bitcoin ETFs stood between $58,000 to $59,000. There was a significant sell-off when Bitcoin dropped below the $60,000 mark at the beginning of May, suggesting that retail investors are behind most of these moves.</p>
<p>Institutional inflows from ETFs played a significant role in the recent Bitcoin rally to new all-time highs. By Feb. 15, Bitcoin ETFs accounted for about 75% of new investment in the world’s largest cryptocurrency as it surpassed the $50,000 mark.</p>

Bitcoin ETFs: The New Gold Rush Draining On-Chain Funds for Traditional Finance

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