The first US exchange traded funds (ETF) that directly hold bitcoin got off to a strong start, with billions of dollars changing hands in a historic first day of trading for the long-sought investment vehicles.
More than US$4.6 billion of shares were traded between nearly a dozen US spot bitcoin exchange-traded funds on Thursday. It was a much-anticipated debut that came a day after the US Securities and Exchange Commission (SEC) gave them the green light, following a campaign of more than a decade by the digital-asset industry.
The Grayscale Bitcoin Trust, which converted into an ETF, saw about US$2.3 billion in volume, Bloomberg data showed.
Photo: AFP
Meanwhile, BlackRock’s iShares Bitcoin Trust — IBIT — saw more than US$1 billion change hands.
“This is definitely ground-breaking,” Bloomberg Intelligence ETF analyst Athanasios Psarofagis said. “There was no doubt demand would be strong for these ETFs, but the numbers across the board are impressive.”
However, it is difficult to compare Thursday’s activity to any other day in ETF history. Typically, only one fund that tracks a new asset class begins trading on a single day. It is unprecedented to see more than 10 nearly identical funds all begin at once. However, even singling in on one ETF indicates the sheer magnitude of trading.
Bitcoin at one point on Thursday surged past US$49,000 to levels last seen in 2021 before falling back to US$46,075 as of 9:30pm in New York. Other major tokens were mixed as speculators took stock of the outlook.
The Grayscale Bitcoin Trust was the most heavily traded ETF debut on record. To be sure, the product has existed in its trust structure since 2013 and had a nearly US$27 billion headstart in asset size.
Trading volume does not indicate buying or selling or investor inflows. Because of the way the funds settle trades, net flows into or out of the products would have remained unknown until at least yesterday.
When the initial bitcoin futures fund began trading in 2021, it saw a turnover of almost US$1 billion during the first day. At the time, the futures fund debut was the second-most heavily traded fund on record.
Psarofagis added a caveat that much of the demand might come from so called “seed” money that is pre-arranged by the fund issuers. Signs of more organic demand, such as from retail investors or financial advisers, might come later on as more broker-dealers list the funds on their platforms.
However, there are still lingering questions. As with any ETF, it is unclear when major distribution platforms would choose to offer the spot bitcoin products. Yet to crypto bulls, the victory in many ways lies in the funds’ very existence.
“What an ETF represents for bitcoin adoption extends beyond the immediate inflows into these products, potentially reshaping the market in entirely unprecedented ways,” Coinbase Global Inc said in a report. “Nevertheless, we think this will take time to unfold.”
While fee wars are a common feature of the US$8 trillion ETF arena, the battle to lower costs broke out before the spot bitcoin ETFs launched. BlackRock, Ark Investment Management and Invesco were among the issuers who dropped their costs in the days leading up to Wednesday’s approval.
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