Spot Bitcoin exchange-traded funds (ETFs) in the United States witnessed their most significant single-day inflows in over 120 days on Oct. 14. 

With more than half a billion dollars pouring into the funds, Bitcoin’s ( BTC ) price topped $67,800 — its highest in more than three months.

ETF Store president Nate Geraci described the event as a landmark day for spot BTC ETFs, noting that they were approaching $20 billion in net inflows over the previous 10 months. 

“Simply ridiculous & blows away every pre-launch demand estimate. This is NOT ‘degen retail’ $$$ IMO. It’s advisors & institutional investors continuing to slowly adopt,” he wrote.

The Fidelity Wise Origin Bitcoin Fund led the fray with an inflow of $239.3 million, its highest since June 4. It was followed by the Bitwise Bitcoin ETF with over $100 million and BlackRock’s iShares Bitcoin Trust with $79.6 million. 

Similarly, the Ark 21Shares Bitcoin ETF saw inflows of just under $70 million, while the Grayscale Bitcoin Trust recorded its first October inflow of $37.8 million, its highest since early May.

Factors driving the Bitcoin ETF surge

The recent surge in Bitcoin ETF inflows is being attributed to a confluence of factors, creating what some experts are calling a “perfect storm” for crypto investments across the board.

For instance, Chris Aruliah, head of institution for crypto exchange Bybit, pointed to the upcoming US election as a key driver, adding:“As we edge closer to the US election in November, investors may be more confident in placing their bets that we'll see the resumption of BTC's bull trend. Both sides in the US elections have been making positive statements towards crypto and there is anticipation of regulatory clarity.”

Similarly, Alicia Kao, managing director for cryptocurrency exchange KuCoin, told Cointelegraph that growing macroeconomic optimism is another crucial factor driving this trend.

In her view, economic data released by various US agencies has eased concerns about a potential recession , with the Federal Reserve already beginning to lower interest rates gradually.

Daily Bitcoin ETF inflows on Oct. 14. Source: CoinGlass

Moreover, she noted that hedge fund participation in digital assets has been increasing steadily, fueled by enhanced regulatory clarity and the launch of spot crypto ETFs globally.

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“Nearly half (47%) of traditional hedge funds now have exposure to digital assets, have presented a marked increase from 29% in 2023 and 37% in 2022. Furthermore, 67% of those hedge funds plan to maintain their current exposure in digital assets, while 33% intend to increase their digital asset investments by the end of 2024, indicating growing institutional confidence and contributing to significant inflows into Bitcoin ETFs,” Kao said.

Institutional adoption driving demand for ETFs

While retail demand is undoubtedly a significant factor, the role of institutional investors in driving these record-breaking inflows cannot be overstated. 

Mithil Thakore, CEO and co-founder of Bitcoin trading protocol Velar, believes that institutions are in the driving seat and accounting for much of the BTC being scooped up through ETFs at present. He added:

“We’re now approaching something like $20 billion in BTC inflows, a figure it took gold more than four years to reach. Given the properties that have made Bitcoin the best-performing asset of the last decade, it’s no surprise that demand for it through ETFs has been so strong.”

Similarly, Ben Caselin, chief market officer at VALR, believes that the recent surge in inflows to US spot Bitcoin ETFs can be attributed to Bitcoin's resilience in both low and high-interest environments.

Moreover, he believes institutional investors are increasingly gaining access to this space and thus driving inflows.

“The participation of financial advisors, pension funds, etc has been crucial for Bitcoin to achieve new price highs and potentially surpass gold as a prominent asset class showcasing its decoupling from traditional markets,” Caselin said.

Kao said that institutional adoption of Bitcoin ETFs has risen significantly by 27% during the second quarter of 2024, with 262 new firms entering the US spot Bitcoin ETF market. 

She noted that by June 30, 2024, the total number of professional firms holding Bitcoin ETFs had reached over a thousand. Despite these striking numbers, Kao said that “retail investors remain the primary holders of Bitcoin ETFs. Institutional investors only manage 21.15% of the AUM, a modest increase from 18.7% in the first quarter of 2024."

Bitcoin ETFs vs. traditional assets 

The success of Bitcoin ETFs, particularly when compared to traditional asset classes like gold, has been nothing short of remarkable. Bloomberg senior ETF analyst Eric Balchunas noted that since the January launch of BTC funds, the asset has hit an all-time high five times. 

Source: Eric Balchunas

While gold has hit record highs 30 times this year, gold ETFs have only seen $1.4 billion in net inflows compared with more than $20 billion for Bitcoin ETFs.

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Caselin believes that while gold boasts a millennia-old history as a legitimate store of value, the modern digital era has presented investors with Bitcoin and all of the unique advantages it bears:

“As a technology-driven asset, Bitcoin's 15-year evolution aligns with contemporary financial trends, positioning it to attract capital more swiftly than traditional assets like gold." 

Arulian, on the other hand, believes BTC has established itself as a completely new alternative asset class that is distinctly different from precious metals — but provides many of the same characteristics.

Tristan Dickinson, chief marketing officer of Bitcoin docking layer exSat Network said that Bitcoin ETFs have already proven to be the most successful ETF — crypto or otherwise — in US history, and are on track to severely outpace gold ETFs. He attributed this rise to Bitcoin's unique characteristics, initial solid performance, high volatility and significant potential for short-term gains.