Retail Got Screwed on the BTC ETF's

00:00

hey there it's Marone white and did you

00:02

hear that the Bitcoin ETFs lost over $1

00:04

billion in 8 days I mean what a failure

00:08

seems the institutions never arrived the

00:10

Boomers aren't buy at least that's the

00:12

narrative making the rounds but I don't

00:14

think that's the entire story ETFs are a

00:17

test of adoption any criticism needs to

00:20

accurately measure if they've succeeded

00:22

on that front and believe it or not the

00:23

data may suggest the biggest adoption is

00:26

already happening so let's review how

00:28

successful the ETFs have been today look

00:30

at the data points behind institutional

00:31

buying and discuss why institutional

00:33

adoption might not be needed in the end

00:36

but first we're going to look at the

00:38

flows so the Bitcoin ETFs launched

00:40

January 11th

00:42

2024 and quickly became some of the best

00:45

performing ETF of the year and just two

00:47

months later in March 11th we have a

00:49

tweet here from Aaron balconis talking

00:51

specifically about that he says two of

00:53

the ETS ibit black Rock's offering and

00:56

fbtc Fidel's offering are ranked three

00:59

and four in the top 10 for flows for

01:02

march across all ETFs and I think part

01:05

of this other part of this Twitter

01:06

thread he talks about the fact that

01:08

maybe some of this could been expected

01:10

six to nine months or even a year end

01:11

but to come as early as it did it's just

01:14

well it's just incredible so already you

01:16

know in March we were talking about how

01:18

successful these were being now you fast

01:21

forward a little bit take it all the way

01:23

to August and you experienced over 17

01:26

billion in inflow I want to show you

01:29

this next slide this this is an image

01:30

that comes from Far Side investors they

01:32

maintain about a two-e rolling average

01:35

or rolling schedule of the the actual

01:37

inflows for each of the ETFs you can see

01:41

here on the bottom it actually has the

01:43

flows inflows coming into ibit fbtc IIT

01:46

having about 20 billion and if you go

01:48

all the way to the right you can see

01:49

gbtc grayscale which had a which had

01:52

head rise right start started with a

01:54

larger number it's seeing 20 billion in

01:56

outflow even with that said you have

01:58

about just 17 billion of inflow for the

02:03

year and this includes the weeks that we

02:05

talked about that billion dollars that

02:06

came out in the eight days in September

02:09

so I mean under any measure we're

02:10

talking about 17 billions of dollars

02:12

it's a lot of money so now we're in

02:15

crypto a lot of people think to

02:17

themselves well 17 billion that's not a

02:18

lot well you need to put the context in

02:21

to what the expectations were going into

02:24

the ETF launch you see a lot of people

02:26

have been talking about the

02:27

institutional launch or the ETF launch

02:29

for a long longtime years in fact and

02:31

you had the Skeptics who saying it

02:33

wasn't going to do well at all and then

02:34

at the beginning before it even launched

02:36

you had people starting to talk about

02:37

what those numbers would actually look

02:39

like and Benjamin on a recent episode of

02:41

trading pit he actually explained what

02:43

the expectations look like let's take a

02:45

look at that clip to hear what people

02:47

were actually thinking before these

02:48

actually went live so the whole

02:51

expectation when Black Rock filed for

02:53

the ETFs uh the 2024 expectation even

02:58

from Eric and a lot of of prime

03:00

brokerages almost the majority of the

03:02

ODC debts coinbase all included the

03:05

expectation was 24 billion on a hyper

03:09

optimistic upper limit actually so um

03:13

that was supposed to be end of

03:16

20124 that was the expectation that in a

03:18

period of 12 months we may hit 24

03:22

billion in net

03:24

inflows if all goes great so for a full

03:27

year what they were looking for was 24

03:30

billion now we're at the we're in August

03:33

and actually the table I just shared

03:34

here it's actually in September you have

03:36

17 billion which is roughly about 70% of

03:38

the highest expectation just to give you

03:41

a little bit more perspective on what

03:43

this might mean if you look down here

03:45

the average inflow is about 101 million

03:48

per trading day if you take that and

03:50

look at the the remainder of the year if

03:52

that continued that'd be about 11

03:54

billion which would net out to about 28

03:57

billion exceeding the highest water Mark

04:00

that they had by 4 billion I think by

04:02

those measures you'd have to say that

04:04

these ETFs have been a success from an

04:06

adoption perspective but to be fair a

04:10

lot of the discussion isn't just about

04:12

flows it's a question of who's actually

04:14

buying these ETFs and that's where a lot

04:16

of the criticism has come from they're

04:18

saying are the institutions actually

04:21

buying well now According to Jim biano

04:23

Bianco micro research the answer is no

04:27

see after the the the one .2 billion

04:30

redemptions that came out in September

04:32

the ones that you're seeing right here

04:33

on the screen hey Marone here I need

04:36

your help to win a bet with Ben Lily he

04:38

said the interest in crypto is so low

04:41

that JB's digital could offer Jay the

04:42

personal AA Trader for free and people

04:46

still wouldn't take the 5 minutes to

04:47

give it a try I said you are crazy and

04:50

I'll prove you wrong so all you got to

04:52

do is click the link here and sign up

04:55

for Jay and Ben loses and he has to

04:56

drink Earl gry tea for an entire year

04:59

with no espresso and if you're wondering

05:01

what's J well it's the AI software

05:04

that's been used to power funds trade

05:05

desk and over nine figures of capital in

05:08

some of the most extreme conditions in

05:10

crypto and now it's tune to have one job

05:13

use lower risk trading strategies to

05:15

consistently grow your account over time

05:18

and here's the best part Jay does the

05:20

trading so you can be in crypto without

05:22

living crypto you get to sleep touch

05:25

grass and spend time with friends and

05:27

family sounds perfect right we click the

05:30

here to get started let's get back to

05:32

the show Jim put out this this tweet

05:35

which was a uh I think about eight

05:37

different tweets actually trying to

05:39

summarize or detail the points he was

05:41

making that these ETFs have been you

05:43

know for lack of a better term a

05:45

non-success they've been a failure on

05:47

the front of actually getting uh

05:49

institutional adoption he says it's not

05:51

an adoption vehicle instead of small

05:53

tourist tool and onchain is returning to

05:55

trafi so he's calling $ 17 billion in uh

05:59

infl flows a uh tourist tool but we're

06:03

going to dismiss that for a moment I

06:04

want to go through the the Four Points

06:05

he notes Here which summarize all eight

06:07

of his tweets says inflows are now

06:09

outflows yep you're going to see the

06:11

outflows agree with that hollers have

06:13

recorded losses well yeah that's true

06:16

but anybody who buys an ETF and then

06:18

sees the price decline is going to have

06:20

unrealized losses on that asset that

06:22

applies to any asset not just Bitcoin

06:24

you can dismiss that advisors are less

06:26

than 10% the Holdings and the average

06:28

trate size is now 12,000 these are

06:31

interesting points that we can actually

06:33

get into let's actually understand does

06:35

this support his point that no

06:37

institutions have arrived and it's just

06:39

a small tourist tool let's get into it

06:43

so the first I want to actually start

06:44

with his discussion on oh let me bring

06:47

this up all right the discussion that he

06:49

has here about small purchases so what

06:52

he's done here is he's got a chart he

06:54

has uh several different ETFs on here

06:57

including the Spy the triple q and what

06:59

I think is the most relevant which is a

07:01

gold ETF GLD the very the y- axis that

07:05

we see here these are actually trade

07:07

amounts uh and the average trade amount

07:10

and then this is over a period of time

07:12

so you see the larger ETFs you've got uh

07:14

spy you got the triple Q then the middle

07:17

part you actually have the gold one uh

07:19

which actually is in gold and on the

07:20

bottom you see Bitcoin so he's

07:23

absolutely right very much smaller

07:25

amounts being applied to bitcoin on a

07:26

fairly consistent basis we're seeing

07:28

consistent purchase ing uh and and not a

07:31

lot of variation on the actual amounts

07:32

that are coming into the the ETFs and

07:35

definitely much smaller when you compare

07:37

to some of these other ETFs I mean if

07:39

you look at gold gold comes at about 60k

07:41

per trade whereas the Bitcoin ETFs are

07:44

about 12,000 that's about a 5x

07:46

difference but then you should ask the

07:48

question is that the whole story not

07:51

entirely when you actually look at some

07:53

of the other metrics around these ETFs

07:56

Bitcoin or at least ibit versus gold

07:59

actually Stacks up pretty well I mean if

08:00

you look at volume here you've got 26

08:03

million daily share volume for ibit

08:06

versus only 6 million for GLD and the

08:08

Daily Dollar volume for ibet is sitting

08:11

at just under a billion whereas GLD is

08:13

over 1.4 roughly 1.4 so it's definitely

08:16

smaller but it's not as if it's a 5x

08:19

difference or 10x difference bear in

08:21

mind GLD is about 20 years old and iit's

08:24

got about eight months so here Jim is is

08:27

definitely pointing out a correct

08:29

statistic but he's not giv a full part

08:31

of the story to try and really talk to

08:33

you about are these people really you

08:35

know buying these are they really retail

08:38

people uh and does this actually say

08:40

that there's no adoption I think there

08:42

is adoption but fair enough it's

08:44

actually smaller smaller purchases

08:46

whether these are serious buyers or not

08:48

time will tell but let's actually get

08:50

into the next part that he's actually

08:51

going into which is are the institutions

08:54

actually coming and here I think he

08:57

actually has a better argument uh that

08:59

actually again has a few holes in it so

09:01

what he does he's got a chart here which

09:04

I believe is going to be coming from um

09:07

uh well it's it's some reporting uh

09:09

maybe it's coming from a Bloomberg

09:10

terminal uh but what it actually shows

09:13

is for ibit uh which I've included here

09:15

he also does it I believe for Fidelity

09:17

and for Grace scale it does a breakdown

09:19

of the institution types that actually

09:21

own the ETF and here he has the hedge

09:24

fund managers which are about 8%

09:26

investment buyers are 7% Brokers of 2%

09:29

all the others are very very small

09:31

number the M middle column is actual

09:34

shares and then the percentage ownership

09:36

is going to be the outstanding shares

09:37

the total shares outstanding so Jim

09:40

looks at this and says listen you don't

09:41

have any investment advisor it's only 7%

09:44

8% going to hedge funds and they're more

09:46

doing speculation and brokerages own

09:49

being nothing and we got you know maybe

09:50

10% if you calculate all the other uh

09:53

institution types owning

09:55

this well there's an interesting point

09:58

of rebuttal here which is is yes this is

10:00

only 7% going to institutions but how

10:03

valuable is it to the marketplace and

10:05

here Matt howan the CIO bitwise put some

10:09

context around this you see he points

10:11

out that the amount that's actually gone

10:13

in from investment advisor perspect

10:16

specifically equals about $11.45 billion

10:20

and that $1.45 billion if you look at

10:22

all the ETFs launched in

10:24

2024 it's actually the second largest

10:28

amount going to investment advisers beat

10:30

out beaten out by just one ETF that he

10:32

notes Here which is

10:34

klmt so you actually have quite a bit

10:37

going into investment advisors when you

10:39

compare ibit to the other ETFs that are

10:41

out there but there's actually more to

10:43

the diversity story and this comes in

10:45

from a tweet again from Eric balconis

10:48

the um excuse me a senior ETF Analyst at

10:52

Bloomberg he points out that in his own

10:55

words the ETFs are freak of nature when

10:58

it comes to ownership and this is a

11:00

tweet he put out just uh in September

11:02

9th Bitcoin ETFs collectively have over

11:04

1,000 institutional holders ibit

11:08

specifically has 661 holders well how

11:10

unique is that well if you compare it to

11:13

the other ETFs that that launch within a

11:15

given year it's not uncommon for them to

11:17

have just two holders which he notes

11:19

Here got 661 holders of ibit versus two

11:22

for the common ETF and again the whole

11:26

conversation here is about adoption and

11:28

whether or not the institutions are

11:29

buying it well it's important to note

11:31

that you have 661 holders of these ETFs

11:33

maybe in very small amounts but they are

11:36

holding something so when Jim's saying

11:38

that there's no there's no adoption from

11:40

an institution perspective he's he's not

11:42

really adding that context and I think

11:44

that's important two more points here

11:47

you know when we talk about the

11:48

allocation many people will say this is

11:50

a highrisk asset very volatile Le based

11:53

on historic parameters therefore you

11:56

should allocate a very small amount to

11:58

it 1 to 2% of a portfolio this can lead

12:01

to average much smaller average purchase

12:03

amounts right and we're still getting up

12:05

to speed again we're still in the 8

12:07

months here so while Jim does have a

12:10

point that it's not as if we have 50%

12:12

adoption by institutions of these assets

12:15

I think he's not giving a full picture

12:17

of the actual institution adoption but

12:19

what about from a retail perspective

12:21

because I think this is the actual story

12:23

that's not getting any air time at all

12:26

and it needs to because what we're

12:28

really seeing here is that normies are

12:31

buying Bitcoin in the billions so if you

12:34

do you know back in the napkin

12:36

calculations you got 17 billion in flows

12:38

that have come in divided by 12,000 the

12:41

average trade that's 1.4 million is that

12:44

1.4 million individuals that have come

12:46

into Bitcoin I don't think so it

12:48

probably needs to be discounted people

12:49

buying multiple trades but how much of

12:52

that is an individual buyer did it did

12:54

it on board 300,000 500,000 even 100,000

12:58

that's a significant number of retail

13:00

people that are coming into the

13:02

ecosystem and the point is that why are

13:05

they coming into the ecosystem now

13:07

rather than not doing it before well we

13:09

actually have an explanation for this

13:11

and this again comes from Benjamin on a

13:13

recent episode of trading pit where he

13:15

explains well how his uncle actually

13:18

bought the ETF and so let's have a look

13:20

at that clip now a lot of these guys are

13:24

starting to buy the ETF I know this

13:26

because my uncle bought a Bitcoin ETF

13:30

the unle has not for years yeah like I

13:36

we were neigh he never bought a piece of

13:38

Bitcoin but he's bought a Bitcoin ETF at

13:41

58k right maybe he's wrong but that

13:44

doesn't matter he says it's a long-term

13:46

hold now for him why the impression that

13:49

the ETF vehicles have given him look you

13:52

can get it and you can put it in your

13:54

brokerage account you can keep it don't

13:57

worry about the custody and if you die

13:59

it it can you know go to your kids don't

14:04

so that opens up a very different tour

14:07

what Benjamin's really pointing out is

14:09

that these ETFs are giving people that

14:11

were Bitcoin curious a way to get into

14:14

the market they weren't willing to cross

14:17

the technical Chasm to understand seed

14:20

phrases to understand you know how how

14:23

to manage this from a custody

14:24

perspective what happens if you die and

14:27

you need to pass it on to people they

14:28

didn't want to do that but once it's in

14:31

their brokerage account and they can

14:32

simply hit buy from an ETF perspective

14:34

they're in so we're now opening up

14:36

Bitcoin to an entire class of people and

14:39

I think you could call the institutional

14:41

Bitcoin is being adopted right adoption

14:44

is actually happening and by focusing

14:47

just on the institutions we're missing

14:48

the broader point which is that more

14:50

people are getting into the ecosystem

14:53

now what does this look like going

14:55

forward great question listen the story

14:57

isn't over and Jim may be proven right

14:59

in the coming months or years if the

15:02

flows slower the trends reverse and the

15:04

momentum of early 2024 comes to a close

15:06

in mate I don't know it's possible that

15:09

some of the the bullishness in 2024 is

15:11

all because they're expecting a you know

15:14

Bull Run in 2024 and 2025 and if that

15:17

doesn't materialize They Run to the

15:19

Hills that's that's possible Right but

15:21

from right now looking at the data as we

15:23

have I think it's pretty hard to argue

15:25

that we're not seeing actual material

15:27

adoption of Bitcoin being you know the

15:29

tourist people as Jim calling it that

15:31

are just going to come and wait and see

15:32

how well it does be it the people who

15:35

call it just fake Bitcoin or what I'm

15:36

calling institutional Bitcoin you have

15:38

buyers they're coming in their uncles

15:41

their aunts maybe even grandmas I don't

15:43

know but adoption is actually happening

15:46

and I want to leave you with one final

15:48

perspective on this that I think may be

15:50

valuable and hardening to any of those

15:52

who are really interested in

15:54

decentralization the real threat to

15:56

these ETFs and their performance May at

15:59

some point come from better onchain

16:01

experiences and self custody see I in a

16:04

recent interview with Isabelle Fox and

16:06

Duke we discussed the potential of

16:08

ordinals ruins brc2 and a host of l2s

16:12

for Bitcoin such as the art Network that

16:14

can radically enhance what Bitcoin can

16:17

deliver from what it does today really

16:19

giving us some level of programmability

16:21

which today you know to date has only

16:23

been available on other L1 such as

16:25

ethereum and salana and while it's still

16:27

early days and it's all very speculative

16:30

these projects might actually deliver

16:32

better ux experiences the kind of

16:34

experiences that finally eliminate the

16:36

technical hurdles and offer Defi and

16:39

other capabilities that exceed what

16:41

trafi can do today and at that point it

16:44

may be too expensive to actually hold

16:47

your Bitcoin with the ETFs and then we

16:50

won't really care about the institutions

16:52

will we all right well time will tell I

16:55

suggest you subscribe to the channel as

16:56

we bring on guests and we bring on these

16:59

ideas we talk about them every week

17:01

discuss them and other projects that are

17:03

going to be relevant to the continual

17:05

adoption in the space but for now this

17:07

is Marone white see you next time