Inflows into US spot Bitcoin exchange-traded funds (ETFs) have turned net negative for the first time in two weeks, indicating that momentum pushing prices upward has cooled off.
According to data from Farside Investors, a UK-based investment firm, net flows from the twelve US Bitcoin ETFs were negative on October 22. While the total outflows were $79.1 million, the lion’s share of that came from one ETF product in the ARK 21Shares Bitcoin ETF, with an outflow of $134 million.
The other ETF products either had no activity or still recorded modest inflows. For instance, BlackRock’s iShares Bitcoin ETF, one of the largest ETFs by assets under management, recorded $43 million in inflows.
Bitcoin ETFs and Institutional Demand
Bitcoin has been stuck in its current price range, less than 10% off its all-time high. Some analysts claim that Bitcoin’s sideways trading cooling inflows from institutional investors.
Despite the recent outflows, Bitcoin ETFs have been one of the hottest topics in the cryptocurrency market over the last few months. Institutional ownership of Bitcoin via ETFs has gone up dramatically this year.
According to data from the on-chain analytics platform CryptoQuant, institutional ownership of Bitcoin through ETFs currently comprises about 20% of its circulating supply. Interest in spot Bitcoin ETFs has grown outside the US, with European investors pumping more than 100 million dollars into these US-based crypto products alone in the last month.
Furthermore, on-chain data showed that the net inflow into the US-based Bitcoin ETFs has surpassed $20 billion this year, which was achieved just last week. Notably, there was over $5 billion in net inflows into these investment products in Q3 2024, underlining the continued demand for direct exposure to Bitcoin among institutional investors.
Japan’s Resistance to Crypto ETFs
While the United States and Hong Kong have made policies to accommodate Bitcoin ETFs, the regulatory framework in Japan is stricter. Tax and regulatory policies in Japan continue to impede the growing demand for crypto ETFs in this jurisdiction.
Japan’s primary regulatory body, the FSA (Financial Services Agency), is still cautious about allowing the launch of cryptocurrency-based ETFs in Japan because of their volatility and risks. Similarly, Japan’s Ministry of Finance noted that gains from crypto investment should be categorized under miscellaneous income and that it is subject to a high tax rate of as much as 55%.
In contrast, traditional Japanese ETFs are subject to a 20% capital gain tax. Hence, many investors and advocacy groups within the country have expressed their displeasure at this huge difference.
If Japan can reduce its tax rate on cryptocurrency investments, it would actually spur more innovation and growth.
Growing Support for Crypto-Friendly Tax Reforms
Following the debate regarding crypto taxes, Yuichiro Tamaki, the leader of Japan’s Democratic Party for the People, has publicly called for changes in these tax reforms to accommodate more crypto investors. Tamaki suggested charging a separate tax for crypto assets like other forms of income at 20%, making them equal to more traditional financial instruments such as ETFs.
He added that there should not be any incidence of tax if crypto assets are exchanged against another crypto asset. While Tamaki’s party has a fairly small number of seats in the parliament of Japan, his proposals are attracting the attention of many from different sectors of the crypto community within Japan.
Japan’s Institutional Investors Stay Long on Bitcoin
Despite Japan’s regulatory obstacle, some of the country’s institutional investors remain adamant about having exposure to Bitcoin. For example, Tokyo-listed investment outfit Metaplanet has made the headlines in recent months with its aggressive accumulation of Bitcoin.
Earlier this month, the investment company added another 108.78 BTC, taking its total number to almost 640 BTC, now worth approximately $40.5 million. That move earned it the unofficial nickname of “Asia’s MicroStrategy” — a US-based business intelligence firm known for its BTC holding strategy.
Continued interest from domestic firms such as Metaplanet shows that Bitcoin remains a key asset of interest for institutional investors in the country.
