The U.S.-listed bitcoin exchange-traded funds (ETFs) saw a lot of trading activity, with $4.6 billion worth of shares changing hands on Thursday afternoon, according to LSEG data. This followed the landmark approval by the US securities regulator on January 10, marking a significant moment for the cryptocurrency industry, testing the acceptance of digital assets as investments.
Eleven bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, began trading on January 11 morning, leading to a competitive battle for market share, Reuters reported. In particular, Grayscale, BlackRock and Fidelity dominated trading volumes, as indicated by LSEG data.
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Caution Amid Strong Initial Trading Volumes
“Trading volumes have been relatively strong for new ETF products,” Todd Rosenbluth, strategist at VettaFi, told the publication. However, he emphasized that this is a longer-term race beyond one-day trading.
The approval by the US Securities and Exchange Commission (SEC) on January 10 came after a ten-year struggle with the crypto industry. Despite the green light, some executives have warned about the high-risk nature of bitcoin, and Vanguard, the largest mutual fund provider, has stated that it has no plans to offer the new spot bitcoin ETFs on its platform.
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SEC Chairman Gary Gensler clarified that the approvals were not an endorsement of Bitcoin, describing it as a “speculative, volatile asset.”
Market Impact and Fee Competition
The ETF launches sent bitcoin prices soaring, hitting the highest level since December 2021. Bitcoin was last up 0.77 percent at $46,303, while the second largest cryptocurrency, ether, rose 2.79 percent to 2597 .95 USD.
Intense competition occurred between issuers, with some cutting fees below the industry standard. Fees on the new bitcoin ETFs range from 0.2-1.5 percent, and several firms have offered to waive fees for a specific period or dollar volume of assets.
Estimates for the potential inflow into spot bitcoin ETFs vary widely, with analysts projecting inflows to top $10 billion in 2024 or possibly reaching $50 billion to $100 billion in 2023 alone, according to the report. However, some cautionary notes highlight the wider investment community’s perception of cryptocurrencies as risky.
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Cryptocurrency-related stocks initially climbed but ended lower, with Riot Platforms and Marathon Digital dropping 15.8 percent and 12.6 percent, respectively. Bitcoin investor Microstrategy fell 5.2 percent, while Coinbase fell 6.7 percent, the report said. By contrast, the ProShares Bitcoin Strategy ETF, tracking bitcoin futures, gained 0.44 percent, it added.
Despite skepticism, some foresee the ETFs paving the way for more innovative crypto products, including spot ether ETFs. Grayscale CEO Michael Sonnenshein expressed plans to register for a covered call ETF, allowing investors to generate income from options on its spot bitcoin product.
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Published: 12 Jan 2024, 07:00 IST