Last week, there was a strong bounce in the price of Bitcoin from its slump in April. This helped boost the performance of spot Bitcoin ETFs that were launched in January.
The price of BTC rose from $61,000 on May 15th to $66,000. Data from CoinGecko showed that it climbed above $68,500 this week for the first time in about a month.
The inflows
As for net inflows to Bitcoin investment products are concerned, they surpassed $942 million. Last week, the inflows had stood at just $144 million.
Moreover, they also reversed four consecutive weeks of outflows recorded before that. CoinShares revealed that macroeconomic conditions were responsible for the evolving demand for Bitcoin.
James Butterfill, the Head of Research at CoinShares, published a blog post on Monday. He said that the CPI numbers revealed last week had been lower than expected, which contributed to the inflows.
Butterfill also added that the demographics of those investing in Bitcoin ETFs were also relevant. He said that private equity, or hedge funds had made the most allocations so far.
Some large pension funds had also made isolated allocations. He said that it was encouraging to see less niche funds purchase Bitcoin.
However, he said that only 25% of the total holdings had been revealed via 13F filings so far. He explained that July 15th was the final filing deadline and it would reveal a lot more.
The factors
Historically, the price movements in Bitcoin have correlated with expectations regarding central bank policies. Prices tend to rise with declining interest rates and vice versa.
There was only a 0.3% increase in April CPI inflation month-over-month. This has renewed confidence in markets that the Fed might change its stance on combating inflation in the country.
This should see a reduction in interest rates, increase the values of both stocks and crypto and lead to cheaper debt.
CME FedWatch said that the chances of the Fed reducing interest rates in September by 25 basis points were 50%.
Allocations
It was not just the macro outlook that changed. Various major US investors also revealed their allocations to spot Bitcoin ETFs.
This was part of the 13F filings this month that were mandatory. By the end of the first quarter, 944 unique filers reported investments of $10.7 billion in Bitcoin spot ETFs.
Each of these filers controls assets of more than $100 million. They make up about 20% of the total investments in ETFs.
The State of Wisconsin Investment Board was one of these investors. As of March 31st, it had invested in Grayscale and BlackRock’s Bitcoin ETFs worth $163 million.
As of the fourth quarter of last year, the total assets held by the pension fund stood at $155 billion. Last week in a memo, Matt Hougan, the CIO of Bitwise, said that the filings were a positive sign.
He said that he was bullish on ETFs due to the investments. It is because the asset managers who have already invested in these investment products are likely to allocate more.
Others also agree that there is considerable room for growth. Investment advisors are mostly active in the space, but their holdings are not that big.