Investors pull record $523 million from BlackRock's flagship bitcoin ETF

By Manya Saini and Niket Nishant

(Reuters) -Investors pulled roughly $523 million from BlackRock's flagship iShares Bitcoin Trust on Tuesday, according to data from Farside Investors, marking the fund's largest single-day withdrawal since its launch.

Bitcoin, a bellwether for crypto markets, fell below $90,000 this week, its lowest level in seven months.

IBIT, the largest spot bitcoin ETF, has attracted strong investor demand since its launch in January 2024 and has been central to the crypto ETF boom.

The fund outflows highlight the severity of the selloff in bitcoin, which has corrected sharply after hitting a record high in October, and underscore how deep the pullback has been across risk assets.

In contrast, gold has remained resilient, calling into question bitcoin's status as a hedge or as a replacement for the yellow metal. Some analysts have said the moves point to investors swapping bitcoin exposure for gold.

"The crypto market entered a hangover in August," said Kraken's Global Economist Thomas Perfumo, adding a lot of that demand was driven by borrowed money.

"Momentum seemingly peaked during the summer. But the truth is this hangover trend started months ago," he added.

Analysts have also pointed to profit-taking by long-term shareholders as well as growing caution among bitcoin treasury firms, which had stepped up their purchases earlier in the year.

"Bitcoin treasury companies purchased nearly $50 billion of bitcoin over the past year. Recently, many of these firms have begun trading at a discount to net asset value, which weighs on near-term market expectations for net new bitcoin purchases by these firms," said Brian Vieten, research analyst at Siebert Financial.

The shift comes at a time when several heavyweight investors have raised concerns about stretched valuations across asset classes.

"An ongoing lack of speculative spirits is weighing on bitcoin," said José Torres, senior economist at Interactive Brokers.

IBIT, which has over $73 billion in assets, has fallen 19% quarter-to-date.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)