US-listed Bitcoin exchange-traded funds saw $4.6 billion value of shares trade hands as of Thursday afternoon, based on LSEG data, as investors jumped into the landmark products approved by the US securities regulator on Wednesday.
The products mark a watershed moment for the cryptocurrency industry that can test whether digital assets — still viewed by many professionals as dangerous — can gain broader acceptance as an investment.
Eleven spot Bitcoin ETFs – including BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, amongst others – began trading Thursday morning, kicking off a fierce competition for market share.
Grayscale, BlackRock and Fidelity dominated trading volumes, the LSEG data showed.
“Trading volumes have been relatively strong for brand new ETF products,” said Todd Rosenbluth, strategist at VettaFi. “But this can be a longer race than just a single day’s trading.
The green light from the Securities and Exchange Commission for the products finally got here late on Wednesday, following a decade-long tussle with the crypto industry.
Some executives called out Bitcoin as a high-risk investment, and Vanguard – the largest provider of mutual funds – said it had no plans to make the latest batch of spot Bitcoin ETFs available on its platform to its brokerage clients.
The SEC had earlier rejected all spot Bitcoin ETFs on investor protection concerns. SEC Chair Gary Gensler said in a press release on Wednesday that the approvals weren’t an endorsement of Bitcoin, calling it a “speculative, volatile asset.”
The ETF launches lifted the price of Bitcoin as much as its highest level since December 2021. It was last up 0.77% at $46,303, while the price of ether, the second-largest cryptocurrency, was up 2.79% at $2597.95.
Race for market share
The regulatory nod sparked intense competition for market share amongst the issuers, a few of whom slashed the fees for his or her products well below the US ETF industry’s standard even before Thursday’s launch.
Fees on the latest Bitcoin ETFs range from 0.2% to 1.5%, with many firms also offering to waive fees entirely for a certain period or for a certain dollar volume of assets. After its ETF began trading, Valkyrie cut its fees a second time to 0.25% and waived them for the first three months.
Grayscale was approved to convert its existing Bitcoin trust into an ETF on Thursday, overnight creating the world’s largest Bitcoin ETF with greater than $28 billion in assets under management.
Estimates for the way much spot Bitcoin ETFs could reel in vary widely. Analysts at Bernstein estimated that flows will construct up step by step to cross $10 billion in 2024, while Standard Chartered analysts this week said the ETFs could draw $50 billion to $100 billion this yr alone. Other analysts have said inflows could possibly be $55 billion over five years.
As the ETFs began trading on Thursday, market participants were closely watching bid-ask spreads: the difference between the price for a trader to purchase into an ETF and the price it might be sold. ETFs with narrower spreads are typically viewed as more desirable.
Trading volume, internal plumbing and the variety of participants involved “are critically vital to driving the spreads to spot,” said Jason Stoneberg, director of product strategy at Invesco, whose ETF with Galaxy Digital debuted on Thursday.
Some analysts cautioned that the euphoria around the approval is perhaps premature. The broader investment community still views cryptocurrencies as dangerous, with scandals such as the implosion of crypto exchange FTX in 2022 adding to investors’ wariness.
A Vanguard spokeswoman said the firm had no plans to launch its own crypto investment products, and that its focus stays on core asset classes such as stocks, bonds and money, which it views “as the blocks of a well-balanced, long-term investment portfolio.”
Speaking at a webinar on Thursday, Sharmin Mossavar-Rahmani, head of the Investment Strategy Group and chief investment officer of Wealth Management at Goldman Sachs, said cryptocurrencies had no place in an investment portfolio.
“When you concentrate on it, where is there any value to something like Bitcoin?” she said. “We don’t think it’s an asset class to take a position in.”
Still, some expect the products to pave the way for much more revolutionary crypto ETFs, including spot ether products.
Grayscale CEO Michael Sonnenshein said in an interview Thursday that the firm plans to file for a covered call ETF in an effort to permit investors to generate income from options on its spot Bitcoin product.