The demand for new Bitcoin investment products is slowing down following the fourth halving event of the first cryptocurrency in the world. Spot Bitcoin exchange-traded funds (ETFs) have been considered a crucial benchmark for institutional investments in Bitcoin since their launch in January 2024. The 11 spot Bitcoin ETFs approved by regulators in the United States in January managed over $13 billion within a few months of their launch. The funds from Gold ETFs which achieved a similar feat took years. The spot BTC ETFs reached up to $1 billion in daily net inflows at their peak, as institutional investors transitioned investments from the Grayscale Bitcoin Trust (GBTC) to these new ETFs.

The Bitcoin halving, occurring every four years, diminishes the block reward for miners by half, meaning less new BTC is introduced into the market daily. The block reward has decreased from 6.25 BTC to 3.125 BTC following the latest halving event. Reduced rewards alongside the high demand for BTC via ETFs had market analysts anticipate a supply shock post the April 20 halving.

Nonetheless, after a series of net positive inflows to Bitcoin ETFs over weeks, the interest in these products appears to be diminishing. While experts had expected GBTC outflows to slow down as institutions would eventually run out of GBTC shares to sell, the ETFs have begun experiencing net outflows recently.

Jag Kooner, head of derivatives at Bitfinex, points out that the reduced inflows and increasing outflows are not linked to the halving but rather to the decline in SPX and Nasdaq alongside geopolitical tensions. He believes the demand for ETFs will recover following the halving as Bitcoin ETFs are a smaller part of traditional finance investment portfolios. Kooner emphasizes this is likely due to a redistribution of risk within these portfolios rather than a withdrawal of attraction from high-risk assets.

The post-halving supply shock theory had been persistent in February and March, with heavy inflows into spot ETFs despite GBTC outflows and BTC price reaching new highs. However, just ahead of the halving, the ETF flows showed passiveness, along with a 10% decline in BTC price from its record levels. Despite this, some experts remain hopeful that Bitcoin ETF demand will see an increase as market conditions improve after the halving.