There was supposed to be a shortage of bitcoins on stock exchanges. 28,000 coins returned in three weeks

Key conclusions

The bitcoin balance on exchanges dropped from 1.337 million coins on June 12 to 1.304 million on July 28, and by August 16 it had returned to approximately 1.332 million. That’s 28,000 coins back, or roughly 84 percent of the earlier outflow.

ETFs can collect bitcoin off exchanges, from OTC desks and from existing holders, so their purchases do not have to touch the exchanges’ visible balance at all.

Flows into funds give a mixed signal in the same window, with the best week since April in early August and three sessions of outflows mid-month.

Bitcoins were missing from exchanges for six weeks, and the market had a ready explanation for it. ETFs are buying up everything they can buy and free coins are running out. The numbers looked convincing. The balance dropped from 1.337 million bitcoins on June 12 to 1.304 million on July 28, or about 33,000 coins and roughly 2.5 percent of the supply.

Then the counter turned back. According to an Aug. 17 Santiment Intelligence post, the state’s balance had reached roughly 1.332 million bitcoins as of Aug. 16, the highest since June 15. 28,000 coins returned, or about 84 percent of what was previously lost. The company summed it up in one sentence: The squeeze took six weeks to build and broke down in less than three.

Where do ETFs get bitcoins from, if not from exchanges?

The answer is more boring than the scarcity narrative and is therefore less likely to be repeated. The SEC agreed to creations and redemptions in kind, i.e. to issuing shares in the fund in exchange for delivered coins. Therefore, an authorized participant does not have to start with a purchase on the spot market. Bitcoins then come from OTC desks or from existing holders and never pass through the exchange’s wallet.

The stock balance therefore measures something narrower than most of us read from it. This is a stock in wallets that analytical companies can assign to trading platforms. The inflow into the fund and the increase in this stock can happen simultaneously, without any contradiction in the data. I have already written about the fact that the supply counter can show zero changes when there is a lot going on. It’s the same problem from the other side.

Inflows into the funds stopped on August 10

The flows give a mixed signal in the same window, so I provide both directions. In the first full week of August, US bitcoin spot ETFs attracted USD 853.54 million, of which USD 693.5 million went to BlackRock’s IBIT fund. It was the best week since April, and the stock balance was rising in parallel.

The streak of five sessions with inflows ended on August 10. Two days later, the funds returned USD 61.16 million, mainly Fidelity and BlackRock. On August 14, the outflow was USD 57.6 million and was the third in a row. So the weekly aggregate says something different here than the last sessions.

What does this mean for you

The exchange balance metric is public, free and easy to check, so it appears in analyzes more often than data for which you have to pay. When someone bases a scarcity thesis on it, the follow-up question is: do they also provide the ETF creation structure and anything about OTC flows? Without it, he describes one chapter of the book and calls it a summary of the whole thing.

With a horizon longer than a few weeks, a single reading of this type should not move your position on its own. In the case of a shorter one, mechanics are important: a larger stock on the stock exchanges means greater liquidity on the sellers’ side, and with weakening inflows to funds, this tends to work against the price. Bitcoin is trading at around $64,700 today.

The inflow to exchanges flattened at 1.332 million bitcoins. There are still about 5,000 coins missing from the June peak and the difference has been stagnant for several days.

There was supposed to be a shortage of bitcoins on stock exchanges. 28,000 coins returned in three weeks – Bitcoin.pl

Where do ETFs get bitcoins from, if not from exchanges?

Inflows into the funds stopped on August 10

What does this mean for you