Investors flocked to the historic products permitted by the U.S. securities regulator on Wednesday, and as of Thursday afternoon, $4.6 billion worth of shares traded hands in U.S.-listed bitcoin exchange-traded funds (ETFs), according to LSEG data.
The goods represent a turning point for the cryptocurrency space, as they will determine whether or not digital assets—which are still generally seen as dangerous investments by many professionals—can become more widely accepted.
Eleven spot bitcoin exchange-traded funds (ETFs), such as ARK 21Shares Bitcoin ETF, Grayscale Bitcoin Trust, and BlackRock’s iShares Bitcoin Trust, among others, started trading on Thursday morning, sparking a heated battle for market control.
Trading volumes were dominated by Grayscale, BlackRock, and Fidelity, according to the LSEG data.
“Trading volumes have been relatively strong for new ETF products,” said Todd Rosenbluth, strategist at VettaFi. However, this is a race that lasts longer than a single trading day.
After a ten-year battle with the cryptocurrency industry, the U.S. Securities and Exchange Commission ultimately approved the products late on Wednesday.
The biggest mutual fund provider, Vanguard, stated that it has no intentions to offer its brokerage clients access to the new batch of spot bitcoin ETFs on its platform after some executives criticized bitcoin as a high-risk investment.
Due to worries about investor safety, the SEC had previously rejected all spot bitcoin ETFs. SEC Chair Gary Gensler described bitcoin as a “speculative, volatile asset” in a statement on Wednesday, stating that the approvals did not represent an endorsement of the cryptocurrency.
With the introduction of the ETF, the price of bitcoin reached its highest point 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.
MARKET SHARE RACE
The regulatory approval spurred fierce competition among the issuers for market share; even before 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 for a specific amount of time or 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 five years 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 drive 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.
The company has no plans to introduce its cryptocurrency investment products, according to a Vanguard spokesperson. Instead, the company is focused on traditional asset classes like stocks, bonds, and cash, which it sees as “the building blocks of a well-balanced, long-term investment portfolio.”
The chairman of Goldman Sachs’ Investment Strategy Group and chief investment officer of Wealth Management, Sharmin Mossavar-Rahmani, stated at a webinar on Thursday that cryptocurrencies have no place in an investing portfolio.
“When you think about it, is there any value to something like Bitcoin,” she stated. “We don’t think it is an asset class to invest in.”
GAIN IN CRYPTO STOCKS
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.
Stocks linked to cryptocurrencies had a rise in the morning on Thursday, but they finished the day down. Riot Platforms and Marathon Digital, two companies that mine Bitcoin, saw declines of 15.8% and 12.6%, respectively.
Crypto exchange Coinbase had a 6.7% decline, while bitcoin investor Microstrategy slumped 5.2%. The bitcoin futures-tracking ProShares Bitcoin Strategy ETF had a gain of 0.44%.
Also on Thursday, Circle Internet Financial, the company behind stablecoin USDC, revealed it has confidentially filed 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.
