On Tuesday, State Street Global Advisors and Galaxy Asset Management announced the introduction of three innovative cryptocurrency-focused exchange-traded funds (ETFs). This strategic move comes amid a backdrop of investor apprehension, as evidenced by the significant withdrawals from spot Bitcoin funds.
Actively Managed Crypto ETFs
According to Bloomberg, the newly unveiled ETFs are:
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- SPDR Galaxy Digital Asset Ecosystem ETF (DECO)
- SPDR Galaxy Hedged Digital Asset Ecosystem ETF (HECO)
- SPDR Galaxy Transformative Tech Accelerators ETF (TEKX)
These funds are slated to commence trading on Tuesday, as per the joint statement from State Street and Galaxy. This collaboration signals the entry of these financial giants into a rapidly evolving market, which has recently seen substantial outflows from US-listed spot Bitcoin ETFs.
In recent weeks, these spot Bitcoin funds have experienced their longest streak of withdrawals, amounting to a staggering $706 million. This trend highlights the prevailing cautious sentiment among investors, particularly in the face of mixed economic data ahead of this month’s Federal Reserve meeting.
Anna Paglia, Chief Business Officer for State Street Global Advisors, remarked: “Unlike traditional spot Bitcoin ETFs that directly hold cryptocurrencies, these new funds aim to provide a diversified approach. They will invest in shares of crypto-linked companies and combine these with other ETFs that hold physical Bitcoin or futures contracts. Some investors are not comfortable with the short-term, volatile price swings of single-currency crypto. We believe the next evolution of this market is the introduction of actively managed digital asset portfolios.”
Bitcoin Market Faces Record Outflows
Data from September 6 indicated that net outflows from 12 spot Bitcoin ETFs reached $170 million, with Fidelity and Grayscale leading the exodus. Fidelity’s FBTC, for example, witnessed nearly $86 million in outflows, marking its seventh straight session of negative flows.
Grayscale’s Bitcoin Trust (GBTC) has also undergone significant withdrawals, with $53 million exiting the fund recently. Since its inception, GBTC has lost over $20 billion, and in just eight days, the fund saw a $280 million exit.
Other funds, including Bitwise’s BITB and ARK 21Shares’ ARKB, have also experienced outflows, illustrating a broader trend of diminishing investor confidence in Bitcoin ETFs as cryptocurrency prices struggle to find strong recovery catalysts.
Over the past month, Bitcoin’s price has displayed notable volatility. The largest cryptocurrency hit a one-month low of $52,600 last Friday but has since rebounded to $56,740. Despite this recovery, BTC remains down 8% over the past two weeks and nearly 6% over the past month.
The future of Bitcoin and the broader cryptocurrency market hinges on macroeconomic conditions. The Federal Reserve’s potential rate cut could serve as a crucial catalyst for the next significant moves in the crypto market.
