Bitcoin Price Seesaws as Bitcoin ETFs Post Outflows

Bitcoin’s (BTC) price fell to below $57,000 on Wednesday from roughly $64,500 last Monday before recovering in what was a weird week. Investors seemingly soured on spot bitcoin exchange-traded funds (ETFs) last week, with Wednesday bringing record-single-day net outflows.

Beyond bitcoin’s price gyrations, the latest week featured the sentencing of Binance founder and former CEO Changpeng Zhao, along with fintech company Block’s (SQ) announcing Thursday it will buy more bitcoin with a portion of its profits.

Bitcoin ETFs Post Record Outflows

Spot bitcoin ETFs ended the week with investors pulling more money out than was headed in, thanks to a record net outflow of $563.7 million on Wednesday, amid price fluctuations for the underlying crypto asset.

That day, Blackrock’s iShares Bitcoin Trust (IBIT) experienced outflows for the first time since its trading debut on Jan. 11, with a net $36.9 million leaving the fund. Fidelity’s Wise Origin Bitcoin Fund (FBTC) also had a fund record $191.1 million in outflows in a single day last week.

Up to this point, these ETFs have been the two of the most popular options among new investors seeking exposure to the spot bitcoin ETF market.

But that wasn’t the only surprise when it came to spot bitcoin ETF flows last week.

Grayscale Bitcoin Trust (GBTC), the largest bitcoin ETF by assets and the target of the largest and most constant outflows so far, recorded its first net inflows on Friday, according to data from Farside Investors. GBTC posted net inflows of $63 million that day, but has recorded a net $17.46 billion gushing out of the fund since Jan. 11. A key reason for the shock that accompanied the flows into GBTC was that the spot bitcoin ETF still has a much higher fee rate than other options on the market at 1.5%.

Despite the outflows, some analysts suggested that investors may not need to be overly concerned. Demand from the spot bitcoin ETFs was credited for the bitcoin rally earlier this year, but that may not be the only influence on bitcoin prices going forward, analysts at Coinbase said.

“While this indicates a slowdown of capital inflows to the asset class via the ETF product, we think that ETF flows (while important) only drive a portion of BTC price discovery given the global and deeply liquid markets on centralized exchanges (CEXs),” said Coinbase analysts David Han and David Duong in a commentary Friday.

Former Binance CEO Gets Four Months in Prison

Former Binance CEO Zhao received a four-month prison sentence in a Seattle court last Tuesday. In November, Zhao stepped down from his position as the head of the world’s largest crypto exchange after pleading guilty to violating the U.S. Bank Secrecy Act. This guilty plea resulted in Binance paying approximately $4.3 billion, marking one of the most significant corporate resolutions involving criminal charges against an executive in history.

Zhao’s relatively short prison sentence has been contrasted with that of former FTX CEO Sam Bankman-Fried’s, who received a 25-year sentence related to the fraudulent use of customer funds. Of course, a key difference in these cases was that Zhao wasn’t accused of misusing customer funds.

The founders of bitcoin wallet Samourai Wallet also were recently arrested on charges related to insufficient anti-money laundering standards.

Block To Put 10% of Profits from Bitcoin Products Into Bitcoin

Block, the company behind fintech products like Cash App and Square, said it will invest 10% of its gross profit from its bitcoin-related business to buy more bitcoin every month.

For context, Block’s first-quarter gross profit from bitcoin via Cash App rose 59% year-over-year to $80 million. Cash App’s bitcoin revenue from sales to customers for the period stood at $2.73 billion, up 26% compared with the same period a year ago. However, just about 3% of the company’s resources are deployed toward bitcoin-related projects.

“We were one of the first public companies to put bitcoin on our balance sheet: we invested $220 million into bitcoin, and that investment has grown by approximately 160% to $573 million as of the end of the first quarter,” Block CEO Jack Dorsey said in the letter.

What To Expect in the Markets This Week

Investors and market watchers will be seeking more clues about any additional regulatory actions in the crypto markets.

Monday kicked off with Robinhood (HOOD) disclosing that it received a Wells Notice from the Securities and Exchange Commission (SEC) earlier in May about its crypto business and that it may face enforcement action from the regulator. The action may be similar to the ones the SEC took against Coinbase (COIN) and Kraken last year related to their registration as broker-dealers for sale of crypto tokens that it considers unregistered securities.