While the recent launch of Bitcoin ETFs, or exchange-traded funds, in the United States has been met with enthusiasm, these financial products have not yet fulfilled their expected role as a major catalyst for cryptocurrency adoption, according to Jim Bianco, CEO of Bianco Research.

IN fasting In a post shared on Elon Musk’s social media platform, X, Bianco suggested that Bitcoin-based ETFs will need more time to mature before they can become a major “instrument of adoption” rather than just a “small tourist tool.”

Bitcoin ETF Outflows and Lack of Institutional Engagement

Bianco’s comments underscored growing skepticism about the performance of Bitcoin ETFs since their stock market debut in January.

While there was a lot of hype surrounding the potential of spot Bitcoin ETFs prior to launch, Bianco pointed to several signs that the market may not yet be as sturdy as expected.

Key issues highlighted by the expert include recent outflows, losses suffered by holders of these ETFs, and a general lack of major institutional investment. All of these issues suggest that the Bitcoin ETF market may need more time to fully develop.

One of the critical points Bianco raised is the significant net outflows in the Bitcoin ETF market. Citing data from Farside Investors, Bianco he showed that there have been net outflows of more than $1 billion from 11 U.S. Bitcoin ETFs over the past eight trading days.

This has reduced total assets under management (AUM) for the Bitcoin ETF from a peak of $61 billion in March to around $48 billion. Bianco argued that these outflows show the need for a more sustainable inflow of interest and capital from institutional investors.

He further noted that the majority of inflows into the Bitcoin ETF came from existing cryptocurrency holders moving their positions back to customary financial accounts (Trad-Fi), rather than novel investors entering the market. This indicates that the ETFs may not have attracted fresh capital as initially expected.

Adding credibility to skepticism, Bianco mentioned that even BlackRock confirms that around 80% of Bitcoin ETF purchases were likely made through self-managed online accounts, further suggesting that institutional investors have not yet fully engaged with the Bitcoin ETF market.

The expert added:

Crypto-quant analysis suggests that most of the Spot BTC ETF inflows came from on-chain holders returning to tradfi accounts — so very little “new” money has entered the crypto space. So far, these instruments have NOT lived up to the “boomers are coming” expectations. Very few have, and those that have are suffering losses and may now leave ($1B in outflows over the past 8 days).

What does the Bitcoin ETF market need to mature?

While the recent performance of Bitcoin ETFs may not have met initial expectations, Bianco remains sanguine that they can still become a valuable instrument in supporting cryptocurrency adoption.

He stressed the need for “patience” and the development of more on-chain tools that could drive the market. Bianco says it could take “a few seasons, including a winter or two and developmental breakthroughs” for the Bitcoin ETF market to really gain momentum.

The CEO noted:

Can these tools be an instrument of adoption? Yes, maybe after next year (2028) and after there is significant development of on-chain tools. (i.e. BTC chain DeFi, NFTs, payments etc.)

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