Daily Management Review

US Bitcoin ETFs Experience Trading Volume Of $4.6 Billion On Opening Day


US Bitcoin ETFs Experience Trading Volume Of $4.6 Billion On Opening Day
According to LSEG data, $4.6 billion in shares of U.S.-listed bitcoin exchange-traded funds (ETFs) traded hands as of Thursday afternoon, as investors pounced into the groundbreaking products approved by the US Securities and Exchange Commission on Wednesday.
The products represent a watershed moment in the bitcoin sector, putting to the test whether digital assets, which are still seen as dangerous by many professionals, can acquire wider recognition as an investment.
Eleven spot bitcoin ETFs, including BlackRock's iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, among others, began trading Thursday morning, igniting a furious battle for market control.
Grayscale, BlackRock, and Fidelity led trade volumes, according to LSEG data.
"Trading volumes have been relatively strong for new ETF products," said Todd Rosenbluth, strategist at VettaFi. "But this is a longer race than just a single day's trading.
The U.S. Securities and Exchange Commission approved the products late on Wednesday, after a decade-long battle with the cryptocurrency industry.
Some executives referred to bitcoin as a high-risk investment, and Vanguard, the largest mutual fund provider, stated that it has no intentions to make the new batch of spot bitcoin ETFs available on its platform to its brokerage clients.
The SEC previously rejected all spot bitcoin ETFs citing investor protection concerns. SEC Chair Gary Gensler said in a statement on Wednesday that the licences were not an endorsement of bitcoin, describing it as a "speculative, volatile asset."
The ETF launches boosted the price of bitcoin to its highest level since December 2021.
The price of ether, the second-largest cryptocurrency, was up 2.79% at $2597.95, while it was recently up 0.77% at $46,303.
The regulatory approval spurred fierce competition among the issuers for market share; even prior to Thursday's launch, some of them drastically reduced the rates for their products.
The new bitcoin ETFs have costs ranging from 0.2% to 1.5%, and many companies are even willing to eliminate fees completely for a specific amount of time or for a specific dollar volume of assets. Valkyrie lowered its costs to 0.25% once the ETF began trading, and it waived them for the first three months.
Grayscale received approval on Thursday to transform its current bitcoin trust into an exchange-traded fund (ETF), resulting in the creation of the largest bitcoin ETF globally, managing over $28 billion in assets.
There are differing opinions about how much spot bitcoin ETFs could earn. While Standard Chartered analysts this week predicted that the ETFs may collect $50 billion to $100 billion this year alone, Bernstein analysts predicted that flows will gradually increase to reach $10 billion in 2024. According to some analysts, inflows over a five-year period might total $55 billion.
Market players were intently monitoring bid-ask spreads, or the difference between an ETF's purchase price and sale price, as the ETFs started trading on Thursday.
Broader spread ETFs are often thought to be better.
"To driving the spreads to a good spot," according to Jason Stoneberg, head of product strategy at Invesco, whose ETF with Galaxy Digital debuted on Thursday, "are critically important" factors to consider along with trading volume, internal plumbing, and participant count.
A few analysts issued a warning, stating that it might be too soon to celebrate the decision. The general investing public continues to see cryptocurrencies as dangerous, and incidents like the collapse of the cryptocurrency exchange FTX in 2022 have only made investors more cautious.
According to a Vanguard representative, the company has no plans to introduce its own cryptocurrency investment products and will continue to concentrate on traditional asset classes like cash, bonds, and equities because it sees these as "the building blocks of a well-balanced, long-term investment portfolio."
The chief investment officer of Wealth Management at Goldman Sachs and head of the Investment Strategy Group, Sharmin Mossavar-Rahmani, stated at a webcast on Thursday that cryptocurrencies had no place in an investment portfolio.
"When you think about it, where is there any value to something like bitcoin?," she said. "We don’t think it is an asset class to invest in."
Yet, some believe the products may open the door for even more cutting-edge cryptocurrency exchange-traded funds, such as spot ether offerings.
In an interview on Thursday, Grayscale CEO Michael Sonnenshein stated that the company intends to apply for a covered call exchange-traded fund (ETF) in an attempt to enable investors to profit from options on its spot bitcoin product.
Initial gains in stocks tied to cryptocurrencies on Thursday were followed by a decrease by the end of the day, with bitcoin miners Riot Platforms and Marathon Digital falling 15.8% and 12.6%, respectively.
Microstrategy, a bitcoin investor, sank 5.2%, while Coinbase, a crypto exchange, fell 6.7%. The bitcoin futures-tracking ProShares Bitcoin Strategy ETF had a gain of 0.44%.
The business that created the stablecoin USDC, Circle Internet Financial, also said on Thursday that it has quietly submitted an application for a U.S. initial public offering. The management and issue of USDC, a cryptocurrency linked to the US dollar, are under the hands of Circle.