Canada’s largest bitcoin fund outflow shows BTC reserves drop 50%

A Canada-based Bitcoin fund operated by 3iQ Corp. has been operating, has seen a significant decline in BTC reserves since June.

Literally called Bitcoin Fund (QBTC: CN), the closed-end investment product holds around 24,000 BTC in its vault of sharp, straight waste at the beginning of June.

Then another big drop pushed the Bitcoin Foundation’s BTC reserves to around 13,000 BTC, according to on-chain data from South Korean analytics firm CryptoQuant.

However, the June withdrawal from the QBTC fund coincided with a surge in 3iQ’s exchange traded fund (ETF) known as 3iQ CoinShares Bitcoin ETF (BTCQ). Specifically, the Canada ETF pulled in an inflow of 2,088 BTC in June 2021, compared to a QBTC outflow of 10,432 BTC in the same month.

Charlie Morris, CIO of ByteTree noted that 3iQ allows its clients to convert their QBTC units into a 3iQ CoinShares Bitcoin ETF. He added that the proliferation of crypto ETFs on major exchanges – which allow redemptions and withdrawals – has led investors to restrict their access to closed-end funds.

However, the exposure to Bitcoin is lower

Meanwhile, 3iQ’s biggest rival, New York-based Grayscale Bitcoin Trust (GBTC) has seen no decline in its BTC reserves. Grayscale Investments closed GBTC since February citing “administrative purposes”. Closed funds do not allow redemptions and withdrawals.

Additionally, the data collected by ByteTree Asset Management shows that 90-day inflows into Bitcoin funds based in the US and Canada have decreased from 191,846 BTC in January 2021 to 12,794 BTC, a decrease of 93.3% .

The 3iQ CoinShares Bitcoin ETF (BTCQ), although it picked up 2,088 BTC in June 2021, has seen an outflow of 354 BTC so far in July 2021.

Fund reserves that reflect institutional interest in Bitcoin rise and fall. This is mainly due to the fact that these investment products tend to offer accredited investors indirect access to the crypto market by issuing shares backed with Bitcoin.

When Bitcoin reserves decrease on average across funds, this usually indicates lower demand for the cryptocurrency from institutional investors.

Feed angle

Institutional investors reducing their exposure to Bitcoin funds coincided with restrictive signals from the Federal Reserve at the end of the Federal Reserve Open Market Committee meeting in June.

In mid-June in particular, the US Federal Reserve announced that it would raise interest rates by the end of 2023 in order to contain the prevailing inflationary pressures. It refers to the US index of consumer prices (CPI), a measure of measuring inflation that rose 0.6% in May 2021 to a three-decade high of 4.5%; The CPI rose 0.9% in June and reached 5.4%, its fastest level in 13 years.

Bitcoin has fallen below $ 32,000 since the Fed’s outlook. However, the leading cryptocurrency remains mostly in the $ 30,000-34,000 price range, suggesting a mixed outlook among private and institutional investors as to where the cryptocurrency will go next.

The conflict of bias arises despite popular narratives that portray Bitcoin as the ultimate advantage against soaring consumer prices. The balance sheet looks something like this: In contrast to the US dollar or other fiat currencies, Bitcoin has a limited supply of 21 million tokens, which makes it scarcer compared to abusive currencies and is more valuable in the long term.

But Bitcoin has reacted negatively to rising inflation in recent months, which has led critics to question its safe haven narrative, at least for the short term. Fortune, for example, covered a dedicated section on Bitcoin’s erratic response to rising consumer prices and stated that cryptocurrency is now approaching its own “empty hand”.

Eric Diton, President and CEO of The Wealth Alliance, notes that Bitcoin has become an overvalued asset after climbing from under $ 4,000 to a record $ 65,000 in almost a year. However, based on the development of the cryptocurrency, the price must correct itself before it continues to rise.

However, a Bank of America survey of fund managers also found that “Bitcoin Long” is one of the busiest trades alongside long ESG and long commodities.

As Cointelegraph reported, traders are closely monitoring the final key activation dates over the next few days and weeks due to their potential impact on the crypto market.