In tune with the flow: May BTC ETP Recap

03 Jun 2022

In tune with the flow: May BTC ETP Recap

May has seen a strong recovery in the BTC ETPs, with global net inflows amounting to 9,765 BTC. Momentum has further strengthened in early June, pushing the global BTC ETP holdings to a new all-time high of 205,008 BTC two days into June.

May: Key takeaways

May has seen a strong recovery in the BTC ETPs, with global net inflows amounting to 9,765 BTC
This led global ETP holdings to grow to 197,536 BTC by the end of May. Momentum has further strengthened in early June, pushing the global BTC ETP holdings to a new all-time high of 205,008 BTC two days into June.
May saw the launch of Australian bitcoin ETFs. The launch has been very underwhelming, and by the end of May Australian BTC ETFs held 237 BTC under management.
Driven by solid inflows to Purpose, Canadian ETFs saw their strongest monthly net inflows in May since May 2022, leading the BTC under management from the Canadian BTC ETFs to surge to a new all-time high.
European ETNs continue to see sustained outflows, leading to negative flows from Europe on aggregate. However, within the European markets, the redeemable ETPs see small net inflows suggesting a restructuring of the European BTC ETP market.
U.S. and Brazilian flows have been rather slow throughout May, with slight monthly net inflows.

Promising recovery in ETP sector: Net inflows of 9,765 BTC

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Source: Bytetree, VanEck, Proshares, Hashdex, StatusInvest, ETF Securities

Bitcoin ETPs recovered from the abysmal flows in April, as May see net inflows amounting to 9,765 BTC. By the end of May, bitcoin ETPs again neared total holdings of 200,000 BTC (spoiler alert, in early June, the flows have further improved, leading total BUM to reach a new all-time high). Still, it’s worth dwelling on the flattening trend in ETPs. Similar to what we see elsewhere in the markets, flows have been in a lull since November, with few noteworthy deviations. Nevertheless, it’s still positive to see positive flows in May, with the Luna debacle and the overall weak state of the market in mind.

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Source: Bytetree, VanEck, Proshares, Hashdex, StatusInvest, ETF Securities

Canadian ETFs behind the strong flows in May

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Source: Bytetree, VanEck, Proshares, Hashdex, StatusInvest, ETF Securities

The last month saw very slight net inflows to U.S. and Brazilian ETFs, minor net outflows in European ETPs, and huge inflows to Canadian ETFs. Canadian ETFs saw their strongest inflows since May 2021, and the trend has strengthened in early June, as I’ll show later. Not included in the matrix below, we find the Aussie ETFs that just launched. They will be included starting next month.

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Source: Bytetree, VanEck, Proshares, Hashdex, StatusInvest, ETF Securities

As of the end of May, European ETPs still dominate the ETP market, but the strong growth in Canadian ETPs suggests that the European hegemony as the leading ETP region will end. European ETPs combined held 92,256 BTC by the end of May, while Canadian ETPs reached a new ATH BUM of 75,333 BTC. U.S. ETFs held a bitcoin exposure through futures equivalent to 27,833 BTC, while Brazilian ETFs held 2,114 BTC by the end of the month. Two Aussie BTC ETFs were launched in May. The CBTC ETF is excluded in the chart above to avoid redundancy of Purpose vs. CBTC data. By now, the size of Aussie ETFs is not even visible on the chart, with EBTC holding 199 BTC by the end of May. To Aussie ETF’s defence, they did launch at a miserable time, in the midst of the Luna collapse and contagion that unfolded. I’d expect the flows down under to improve with time.

Still outflows from Europe

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Source: Bytetree

Europe maintains its trend of outflows in May. The tendencies within the European ETP market remain similar to what I’ve previously highlighted – the older ETN structures see outflows, while the newer ETPs with active redemptions see inflows. For instance, Coinshares’ physical ETP saw net inflows of 487 BTC in May and has seen consistent monthly net inflows each month since February. On the other hand, the XBT bitcoin trackers have seen monthly outflows throughout the same period. These tendencies lead to stickiness in Europe’s net outflows, but the trend seems to be an overall restructuring of European BTC exposure in investment vehicles over time.

Strongest monthly net inflows in Canada since May last year

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Source: Bytetree

Canadian BTC ETPs saw massive net inflows in May of 10,182 BTC, and May 2022 saw the highest inflows since May last year. As I illustrate below, more or less the entirety of the surge in May can be ascribed to the Purpose ETFs.

Net positive flow driven by surge in Purpose

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Source: Purpose

From April 28th to June 1st, Purpose has seen its BUM grow from 31,150 BTC to 43,650 BTC. The flows in May in Purpose were somewhat erratic, with huge inflows followed by huge outflows in the midst of the mid-May market collapse, but growth has since recovered, leading Purpose to end May on a high note with their BUM reaching a new all-time high of 43,650 BTC. Some have pointed toward the launch of the Cosmos-Purpose Bitcoin Access ETF (CBTC) in Australia to explain the growth, but as I show in the Aussie section of this report, this is far from the truth. CBTC’s net BTC exposure currently sits at 38 BTC, and their AUM is largely irrelevant to the growth in Purpose. I’d rather suggest that the inflows are driven by American investors seeking to deploy capital to the non-currency hedged Purpose ETF, eyeballing this as an attractive point of entry given bitcoin trading at 1.5-year range lows.

Flat month for U.S. BTC ETFs

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Source: Bytetree, ProShares, Vaneck

Futures-based U.S. BTC ETFs saw a very slow month in May, seeing net inflows of 210 BTC. Nevertheless, May saw interesting developments related to the potential launch of a spot bitcoin ETF in the United States. While ARK and 21 Shares’ filing in April unsurprisingly got rejected by the SEC, ARK refiled its BTC ETF application after Teucrium’s futures-based filing was approved. Teucrium’s filing was approved under the Securities Exchange Act of 1934, in contrast to the 1940 act filings related to previous futures-based ETF approvals. Bloomberg analyst James Seyffart explained the potential implications of approval of filings being approved under the 19b-4 process in a twitter thread in January. Seyffart and Balchunas followed up on Mar 24th explaining why they think spot ETFs will be approved in early summer 2023. They point toward the January SEC proposal, which could force spot markets to comply with the SEC under the 1934 act by registering with the agency. The Bloomberg analysts expect the framework to be finalized sometime between November 2022 and May 2023. Grayscale and Bitwise await their final verdicts in early July, and while the Teucrium approval further enhances the arguments in favor of approving spot ETFs, the market seems unconvinced of such an approval occurring, with Grayscale trading at a discount of 28.65% to its NAV.

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Source: ProShares

While the U.S. flows remain slow, they have seen a promising growth by the end of May and in the first days of June, leading BITO’s BTC exposure to reach its highest level since late April. The U.S. ETF market is still dominated by BITO, accounting for 94% of the market.

Perpetual net inflows to Brazil

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Source: Hashdex, StatusInvest

Brazilian bitcoin ETFs still see net monthly inflows and have not seen a single month of net outflows since launch. Nevertheless, flows remain rather small, with BITH11 being the largest Brazilian BTC ETF, seeing a BUM of approximately 1,350 BTC compared to QBTC’s 900 BTC.

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Source: Hashdex, StatusInvest

New kid on the block: Australia!

Australian bitcoin ETFs have seen a slow start, amassing an AUM of 240 BTC two weeks after launching.

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Source: ETF Securities, Cosmos Asset Management

Two weeks after their launch, Australian bitcoin ETFs have seen their AUM reach slightly above AUD$ 10m after a slow start. The ETFs were launched amid the market chaos during the Luna collapse. Thus it’s no wonder the ETFs have seen a burdensome launch.

Two bitcoin ETFs have been launched in Australia:

ETFS 21Shares Bitcoin ETF (EBTC). This ETF offers exposure to physical bitcoin.
Cosmos-Purpose Bitcoin Access ETF. This ETF is structured as a funds-of-funds ETF with exposure to bitcoin through the Canadian Purpose ETF.

EBTC has seen the strongest start of the two since launch, with its bitcoin exposure sitting at 199 BTC two weeks after launch. Meanwhile, CBTC has a bitcoin exposure through its Purpose holdings equaling approximately 38 BTC. The vast difference in the AUM between the ETFs is unsurprising, given the more direct exposure enabled through EBTC.Nevertheless, EBTC actually experienced substantial outflows at the end of May, and the launch has, in general, been rather disappointing, seeing very muted volumes.

Zooming back out: Growth in Canada quiet elsewhere

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Source: Bytetree, VanEck, Proshares, Hashdex, StatusInvest, ETF Securities

In sum, the entire growth in the BUM of BTC ETPs can be ascribed to massive Purpose inflows last month, with the rest of the BTC ETP market seeing limited activity. Canadian BTC ETPs AUM saw a massive 16% growth in May, furthering their grip on the global ETP market. I wonder how this distribution would’ve looked if Garry G and the SEC greenlighted spot ETFs.

This tune ends on a high note

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Source: Bytetree, VanEck, Proshares, Hashdex, StatusInvest, ETF Securities

The two first days of June have been happy days in the BTC ETP sector. ProShares, Purpose, and 3iQ Coinshares have experienced massive inflows, leading the global BTC under management by BTC ETPs to soar to a new all-time high of 205,000 BTC after seeing net inflows of 7,152 BTC in the first two days of the month. This is a promising sign for what’s to come, and it suggests that the market