BTC continues to sow panic among crypto investors. BlackRock's IBIT Bitcoin ETF, long seen as a safe vehicle for gaining exposure to digital assets, now has a negative average return. A sudden reversal which highlights the fragility of institutional flows in a still unstable crypto market.
In brief
- Bitcoin's fall has plunged BlackRock's IBIT ETF into negative territory.
- Investors are fleeing crypto funds, disappointed by the failure of BTC as a safe haven.
IBIT in the red: bitcoin erases investors' gains
Since late January, dollar-weighted returns of BlackRock's Bitcoin ETF went below zero. This is despite a historic peak of $35 billion in cumulative gains in October.
This reversal can be explained by the massive influx of capital at very high levels. Investors who entered at the peak are now suffering heavy losses. Concretely, the average price of BTC paid by IBIT holders is now higher than the current price.
This situation reflects the high sensitivity of Bitcoin ETFs to market movements. In a few days, ETF asset management found itself trapped by the timing of the inflow of funds.
Capital flight: bitcoin fails as a safe haven
The week of January 25 saw take out $1.1 billion from BTC fundsout of a total of $1.73 billion in outflows for the entire crypto sector. According to the datathis stampede mainly affects American investors.
Even more worrying, bitcoin fails to convince as a safe haven. Faced with inflation, the markets expected behavior similar to that of gold. But where the yellow metal flirts with the heights (more than $5,400 per ounce), the BTC is struggling to find a new lease of life.
The expected decline in interest rates was not enough to reverse the trend. Confidence is wavering, including among institutional investors, the driving forces behind IBIT's dazzling debut. This disenchantment poses a real question about ability of bitcoin to stabilize its position in long-term portfolios.
In any case, the IBIT affair reminds us that even the best marketed products remain vulnerable in an unpredictable crypto market. While gold reassures, bitcoin divides more than ever. It remains to be seen whether this correction will become an opportunity or a lasting warning signal.
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