Bitcoin spot ETFs in the United States are showing signs of waning momentum after Tuesday marked their largest daily net outflow since launch.

The ten funds suffered cumulative outflows worth $326 million, or 5,117 BTC in total. That’s the second day of outflows in a row, after losing $154.4 million, or 2,293.1 BTC, on Monday.

Why Are Bitcoin Spot ETFs Losing Money?

Outflows came solely from the Grayscale Bitcoin Trust (GBTC) on both days, resulting in a loss of $1.086 billion in Bitcoin this week alone. Monday, in particular, was the fund’s worst-performing day as an ETF, with $642.5 million of assets lost.

While the iShares Bitcoin Trust (IBIT) – Grayscale’s largest competitor – counterbalanced much of GBTC’s selloff with $451.5 million of inflows on Monday, the fund only absorbed $75.2 million on Tuesday – one of its worst performances since launch.

Aside from Fidelity and Bitwise, no other Bitcoin ETF saw net inflows.

Bitcoin ETF Flow – 19 March 2024

All data in. Record net outflow of $326m pic.twitter.com/iBmBiMR74Z

— BitMEX Research (@BitMEXResearch) March 20, 2024

The last time Bitcoin spot ETFs saw two net outflow days in a row was shortly after their launch in January, when traders “sold the news” around their highly anticipated arrival.

At the time, Bitcoin’s price fell from $49,000 on launch day to $39,000 less than two weeks later. Similarly, Bitcoin’s price today has retraced from $74,000 last week to $64,000 at writing time after ETF inflows slowed down on Friday.

Understanding Grayscale’s Outflows

On-chain data analysts at Glassnode say that pullbacks of this sort are standard fare for Bitcoin bull markets, as long-term holders start to sell their coins once they’ve accumulated enough paper profits.

Since December, Glassnode claims that over 700,000 BTC has left the hands of long-term holders – 60% of which have come from Grayscale.

The cyclical patterns of #Bitcoin on-chain data continue to be remarkably reliable, with this ATH break looking almost exactly like prior ATH breaks.

It makes all the sense in the world for the market to pause, correct, and/or consolidate here, and digest the move.

Sit tight.…

— _Checkɱate 🟠🔑⚡☢️🛢️ (@_Checkmatey_) March 17, 2024

“It makes all the sense in the world for the market to pause, correct, and/or consolidate here, and digest the move,” said lead Glassnode analyst James Check on Sunday.

Grayscale has yet to experience a single day of net inflows since January 11. While old investors sell their shares at a profit, new Bitcoin investors see no incentive to invest in the fund over newer alternatives that boast much lower management fees.

“Remember those people leaving are pre-ETF investors, not new buyers,” noted Bloomberg ETF analyst Eric Balchunas, over Twitter on Wednesday.

Grayscale CEO Michael Sonnhenshein said in an interview this week that GBTC would lower its management fee over time. The fund has also filed to launch a “mini” Bitcoin ETF, which experts expect will come with a lower fee than its flagship fund.