Bitcoin ETF Inflows Accelerate, Credit Spreads Indicate Risk-on

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the cliff-notes:

• Bitcoin has surged ~27% in the past two weeks, showing resilience amid global geopolitical uncertainty.
• High-yield corporate bond prices are only slightly elevated, suggesting room for bitcoin and other risk assets to rise further.
• BlackRock's IBIT spot bitcoin ETF saw a monumental $527 million net inflow on Monday, indicating strong and growing institutional interest.

Good afternoon readers,

Before my flight leaves for the Bitcoin Conference in Nashville this week (I hope to see plenty of you there!) I'd like to give one last lay of the land before our regular content calendar resumes next week.

Bitcoin has had a thunderous 2 weeks. Up ~27% at the time of writing, BTC has soared back up to the top of this ~$15,000 range that it's been locked in for the last 4 months. We'll talk about the key drivers in this post, but one thing is clear: it is highly encouraging that bitcoin has weathered the storm of world events that have occurred during the last two weeks. Albeit still in its infancy, bitcoin's market price managing to rise during a period of such tense geopolitical uncertainty highlights the maturation of bitcoin as an asset in the eyes of the market:

High-yield corporate bond prices indicate risk-on sentiment in markets. When HY bond prices are elevated, and spreads are narrow, it indicates a broader appetite for investments farther out on the risk curve that have much higher appreciation and profit potential.

As cycles approach their top, high-yield corporate bond prices rise. When they're still in the nascent pre-bull market period, they are tame and not elevated. Right now, judging by this chart provided by Bitcoin Magazine Pro, high-yield corporate bond prices are still only slightly elevated off of their cycle lows. This suggests that there's room for marketwide risk appetite to expand, and that bitcoin, alongside HY credit and other risk assets like stocks, has room to run higher before this cycle has exhausted itself and we flip into a bear market:

BlackRock's IBIT spot bitcoin ETF saw $527 million in net inflows on Monday alone. It's hard to articulate just how monumental of a buy this is, especially given that the vehicles have already been live for 7 months and there was no explicable catalyst for such a huge inflow. The only reasonable explanation is that Wall Street understands bitcoin's native events just as well as spot BTC holders do, or at least they're starting to.

For the average bitcoin investor, events like Mt. Gox creditors getting their coins back and Germany selling all 50k+ BTC are reasons to bid, but not necessarily for Wall Street which is reportedly out of the loop and only cares about bitcoin as beta to the Nasdaq. Knowing that these spot vehicles are seeing inflows and outflows commensurate with events happening on the ground native to bitcoin is an encouraging sign that not only does bitcoin have a whole new cohort of long-term investors growing behind it, but this cohort is actively learning about the value proposition of bitcoin beyond mere stock market beta.

This was IBIT's 6th-largest daily net inflow ever, accelerating to a pace not seen since its launch back in Q1 when the hype around these vehicles was fresh. BlackRock's IBIT and Fidelity's FBTC are #4 and #8 in year-to-date ETF flows. That's a huge deal. Retail and institutional interest in spot bitcoin exposure has not only been record-breaking and shattered all expectations, but it's now catching a strong second wind as we round out the month of July:

Now there are competitors on the horizon. Spot Ethereum ETFs launched today in the United States; doing $1.083 billion in day-1 volume and likely taking in several hundred million dollars. The ETH ETF day-1 volume underperformed the BTC ETF day-1 on a market cap-weighted basis anywhere from 30-40%. I'll be watching this closely to see how Wall Street treats these two adjacent but very different asset classes. I expect the informational arbitrage between bitcoin and "crypto" as two wholly different types of investable assets to widen in the years and decades to come. This underperformance, albeit early and without enough data to necessarily make this assertion, is an early indication that markets are pricing these assets as two completely different things; ascribing more value to bitcoin's absolute scarcity and immutable monetary policy:

Final thought: Trump is slated to speak about Bitcoin this Saturday in Nashville. I'll be there. What a time to be alive.

Take it easy,

Joe Consorti

Theya is the world's simplest Bitcoin self-custody solution. With our modular multi-sig vaults, you decide how to hold your keys.

Whether you want all your keys offline, shared custody with trusted contacts, or robust mobile vaults across multiple iPhones, it's Your Keys, Your Bitcoin.

Download Theya on the App Store.