Why Bitcoin ETFs Have Yet to Generate Mass Adoption: Bianco Research CEO Weighs In
In a post shared on Elon Musk’s social media platform, X, Bianco suggested that ETF’s need more time to develop before becoming a significant “adoption vehicle” instead of a “small tourism vehicle.”
The recent launch of bitcoin ETFs or exchange-traded funds in the United States appears to have been met with enthusiasm. However, according to Jim Bianco, managing director of Bianco Research, these financial products have yet to fulfill their intended role as a primary catalyst for cryptocurrency adoption.
Bitcoin ETF Redemptions and Lack of Institutional Participation
Bianco’s comments underscore the growing skepticism surrounding the performance of Bitcoin ETFs since they debuted in January. While there was much pre-launch buzz about the potential of spot bitcoin ETFs, Bianco pointed to several signs that the market is still underperforming.
Among the key issues he cited are recent exits, losses by holders of these ETFs, and a general lack of significant institutional investment. All of which suggest that the bitcoin ETF market may need more time to fully develop. The significant net outflows within the bitcoin ETF market is a critical point raised by Bianco.
Citing data from Farside Investors, Bianco showed that “There have been more than $1 billion in net outflows from the 11 U.S. Bitcoin ETFs in the last eight trading days alone.
From a high of $61 billion in March, the total assets under management (AUM) of bitcoin ETFs have fallen to around $48 billion. These outflows demonstrate the need for more sustained institutional interest and inflows, Bianco argued.
He further noted that most of the inflows into ETFs came from existing crypto holders moving their positions into traditional financial accounts (trad-fi) rather than new investors entering the market. This is an indication that the ETFs may not have been as successful in attracting new capital as initially expected.
Adding to the skepticism, Bianco mentioned that even BlackRock confirms that approximately 80% of bitcoin ETF purchases were likely made through self-directed online accounts, suggesting that institutional investors have not fully entered the bitcoin ETF market. The expert added the following:
“Crypto-quantitative analysis suggests that most of the BTC spot ETF inflows were due to blockchain holders returning to financial transaction accounts, so very little “new” money has entered the crypto space. So far, these instruments have NOT lived up to the “here come the boomers” expectation. Very few have come in, and those that have are suffering losses and may now be leaving (outflows of $1 billion in the last 8 days).”
What Does the Bitcoin ETF Market Need to Mature?
Bianco remains optimistic that bitcoin ETFs can still be a valuable tool for cryptocurrency adoption, even though their recent performance has fallen short of initial expectations. His emphasis is on the need for “patience” and the development of more blockchain tools that could drive the market forward. Bianco says it may take “a couple of seasons, including a winter or two and development breakthroughs” before the ETF market really takes off. The CEO noted the following:
“Can these tools be an adoption tool? Yes, perhaps after the next adoption (2028) and after there has been significant development of on-chain tools (i.e. BTC DeFi chain, NFTs, payments, etc.).”
By Leonardo Perez