Crypto Currents: Spot bitcoin ETFs seeing outflows

Institutional conviction on bitcoin is fraying, with analysts from Morgan Stanley advising clients to “harvest gains” as the crypto enters its “fall season.” However, as institutional flows for spot ETFs cool, major financial players, including Visa, Coinbase, and Franklin Templeton, are deepening their involvement in blockchain infrastructure, stablecoins, and tokenization. Stay up on the crypto news that matters with “Crypto Currents,” daily from The Fly. Join us at 2 PM ET for your essential briefing on the fast-moving world of cryptocurrency on FlyCast radio, Also, subscribe to our YouTube channel for the Crypto Fly By weekly recap.

INSTITUTIONAL BITCOIN CONVICTION FADES: The powerful institutional tailwind that drove bitcoin (BTC-USD) to records earlier this year is retreating, according to a report from Bloomberg. Spot bitcoin ETFs, which took in over $25B this year, have seen outflows of about $2.8B in the past month. Analysts see mounting signs of fatigue, with some professional investors losing patience over bitcoin’s 10% gain this year, which lags behind tech stocks like Nvidia (NVDA). Markus Thielen of 10X Research warned that risk managers might urge clients to lighten positions, noting, “You probably need to buy more Nvidia for when you send out your statement to investors.” Citigroup (C) analysts echoed this sentiment, stating, “new money is cautious and there is not much urgency or rush to get invested.”

MORGAN STANLEY DECLARES ‘FALL’ FOR CRYPTO: Adding to the cautious tone, strategists from Morgan Stanley (MS) believe the crypto market has entered the “fall season” of its four-year cycle. In a podcast discussion, investment strategist Denny Galindo advised that “fall is the time for harvest. So, it’s the time you want to take your gains.” Despite this cyclical warning, other strategists at the firm noted that institutional investors, enabled by ETFs, have begun viewing bitcoin as a legitimate macro hedge, similar to digital gold.

SEC CHAIR UNVEILS ‘TOKEN TAXONOMY’ PLAN: SEC chair Paul Atkins is developing a “token taxonomy” to clarify which cryptocurrencies are securities, The Block reports. Speaking at the Federal Reserve Bank of Philadelphia’s Fintech Conference, Atkins said the plan will be anchored in the Howey Test. He noted that while a token can be part of an investment contract, it may not be a security forever, stating that as networks mature and “control disperses,” the issuer’s role diminishes. Atkins also mentioned he has directed staff to explore allowing tokens to trade on non-SEC platforms, such as those regulated by the CFTC.

COINBASE HIRES FOR ‘EVERYTHING EXCHANGE’ PUSH, SCUTTLES DEAL: Coinbase (COIN) is moving aggressively to build out its “everything exchange” strategy, hiring former Goldman Sachs (GS) partner Liz Martin as its new VP of Product for Markets and Derivatives. Martin, a 25-year veteran of the investment bank, will lead Coinbase’s exchange and derivatives business. This move comes as Bitwise CIO Matt Hougan, in a memo to clients, praised Coinbase’s new regulated token sale platform, suggesting it could position the firm as the “Charles Schwab (SCHW) + Goldman Sachs + NYSE” of crypto.

VISA AND FRANKLIN TEMPLETON EXPAND ONCHAIN: While direct bitcoin investment has cooled off, payments and asset management leaders are pushing deeper into blockchain rails. Visa (V) announced a new pilot program that allows businesses to send payouts directly to stablecoin wallets using Visa Direct. The feature, aimed at creators and gig workers, will allow recipients to receive funds in USD-backed stablecoins like USDC (USDC-USD).

In asset management, Franklin Templeton (BEN) has brought its Benji Technology Platform live on the Canton Network. The move links the firm’s tokenization infrastructure to Canton’s institutional blockchain, which is backed by firms including Goldman Sachs (GS), BNP Paribas (BNPQY), and Broadridge (BR). Standard Chartered (SCBFY) recently predicted the tokenized real-world asset market could hit $2T by 2028.

STOCKS IN FOCUS: BITDEER AND CIRCLE: Shares of bitcoin miner Bitdeer (BTDR) fell over 30% on Tuesday following its Q3 earnings release.. The drop was compounded by news of a fire at its Massillon, Ohio, facility, which damaged two buildings under construction. No injuries were reported, and no mining equipment was installed.

Meanwhile, stablecoin issuer Circle (CRCL) reported strong Q3 earnings, with net income rising 202%  vs. last year to $214M and USDC circulation up 108% to $73.7B. The stablecoin issuer also revealed it is “exploring the possibility” of a native token for its new Arc blockchain, as reported in their earnings release.

PRICE ACTION: As of time of writing, bitcoin was trading at $101,905.00, while ether was trading at $3,417.26, according to price data from CoinDesk.