Bitcoin Under Pressure: State Street And Galaxy Roll Out Three New Crypto-Focused ETFs

On Tuesday, State Street Global Advisors and Galaxy Asset Management announced the launch of three new cryptocurrency-focused exchange-traded funds (ETFs). The move comes as investors have been pulling out of spot Bitcoin funds, reflecting a sense of fear in the market.

Actively Managed Crypto ETFs

According to Bloomberg, the newly launched exchange-traded funds include the SPDR Galaxy Digital Asset Ecosystem ETF (DECO), the SPDR Galaxy Hedged Digital Asset Ecosystem ETF (HECO), and the SPDR Galaxy Transformative Tech Accelerators ETF (TEKX). Trading for these funds is set to begin on Tuesday, according to a statement from the firms.

This partnership marks State Street and Galaxy’s entry into a market experiencing substantial outflows from US-listed spot Bitcoin ETFs. Recently, these funds have recorded their longest streak of withdrawals, with a notable $706 million exiting the market. 

This trend underscores a wavering risk sentiment among investors, especially in light of mixed economic data leading up to this month’s Federal Reserve meeting. Anna Paglia, chief business officer for State Street Global Advisors, stated:

Unlike traditional spot Bitcoin ETFs that directly hold cryptocurrencies, these new funds aim to provide a diversified approach. They will invest in shares of crypto-linked companies and combine these with other ETFs that hold physical Bitcoin or futures contracts. Some investors are not comfortable with the short-term, volatile price swings of single-currency crypto. We believe the next evolution of this market is the introduction of actively managed digital asset portfolios.

Bitcoin Market Faces Record Outflows

Data from September 6 revealed that net outflows from 12 spot Bitcoin ETFs reached $170 million, with Fidelity and Grayscale leading the charge. Fidelity’s FBTC, for instance, saw nearly $86 million in outflows, marking its seventh consecutive session of negative flows.

Grayscale’s Bitcoin Trust (GBTC) has also experienced heavy losses, with $53 million in outflows recently. Since its inception, GBTC has lost over $20 billion, and in just eight days, the fund has seen a $280 million exit. 

Other funds, such as Bitwise’s BITB and ARK 21Shares’ ARKB, have also seen outflows, illustrating a broader pattern of declining investor confidence in Bitcoin ETFs as crypto prices lack significant catalysts to recover from the current downturn.

Over the past month, the Bitcoin price has experienced significant volatility, with notable ups and downs, as the largest cryptocurrency on the market hit a one-month low of $52,600 on Friday. Since then, however, BTC has regained the $56,740 level, but it has still been down 8% over the past two weeks and nearly 6% over the past month. 

As of now, it remains to be seen if easier macroeconomic conditions can be a catalyst not only for the BTC price but also for the broader crypto market, with the Federal Reserve’s rate cut as the key to the next moves. 

Featured image from DALL-E, chart from TradingView.com