In a remarkable development, the American financial landscape witnessed a significant shift with the launch of Bitcoin-focused exchange-traded funds (ETFs) on major U.S. stock exchanges. As per the latest data from LSEG, an impressive $4.6 billion in shares were traded by Thursday afternoon, underscoring the keen interest of investors in these pioneering products, which received the green light from the U.S. Securities and Exchange Commission (SEC) just the day before.
This development marks a turning point in the cryptocurrency sector, presenting an opportunity to gauge if digital assets, often perceived as high-risk, can secure a more mainstream investment status.
The trading day saw the debut of eleven Bitcoin ETFs, featuring prominent names such as BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and the ARK 21Shares Bitcoin ETF. These ETFs sparked intense competition for market share, with Grayscale, BlackRock, and Fidelity emerging as the top players in terms of trading volume.
Todd Rosenbluth, a strategist at VettaFi, observed that the trading volumes for these new ETF products were robust, but he also emphasized that this is just the beginning of a much longer journey in the investment world.
The SEC’s decision to approve these products came after years of back-and-forth with the cryptocurrency industry. Despite this milestone, some industry leaders remain cautious about Bitcoin’s volatile nature. For instance, Vanguard, a major mutual fund provider, stated it would not offer these new Bitcoin ETFs on its platform to brokerage clients.
SEC Chair Gary Gensler clarified that the approval of these ETFs should not be seen as an endorsement of Bitcoin, which he described as a speculative and volatile asset.
The ETFs’ launch positively impacted Bitcoin’s value, propelling it to its highest level since December 2021. Bitcoin was last seen trading up by 0.77% at $46,303. Similarly, Ether, the second-largest cryptocurrency, saw a 2.79% increase, reaching $2597.95.
The race for market dominance among these ETFs led to aggressive fee strategies. Many firms reduced their fees significantly, some even offering to waive them for a certain period or for a specific volume of assets. Valkyrie, for example, lowered its fees to 0.25% and waived them for the first three months following the launch of its ETF.
Grayscale’s conversion of its existing Bitcoin trust into an ETF instantly created the world’s largest Bitcoin ETF, boasting over $28 billion in assets under management. Projections for the potential inflow into these spot Bitcoin ETFs vary, with estimates ranging from $10 billion by 2024 to as high as $100 billion within the current year.
As trading commenced, market analysts closely monitored the bid-ask spreads of these ETFs, a key indicator of their desirability.
Jason Stoneberg, director of product strategy at Invesco, highlighted the importance of trading volume, internal mechanics, and participant diversity in narrowing these spreads. Invesco’s ETF, created in collaboration with Galaxy Digital, also made its debut on Thursday.
However, some analysts cautioned that the excitement surrounding these ETFs might be premature, given the broader investment community’s ongoing concerns about the risks associated with cryptocurrencies. The FTX collapse in 2022 further exacerbated these worries.
Vanguard reiterated its commitment to traditional asset classes like stocks, bonds, and cash, viewing them as the foundation of a well-balanced, long-term investment portfolio. Sharmin Mossavar-Rahmani, head of the Investment Strategy Group and chief investment officer of Wealth Management at Goldman Sachs, echoed this sentiment during a webinar, questioning the value and viability of cryptocurrencies as an investment class.
Despite mixed reactions, the introduction of these Bitcoin ETFs is expected to pave the way for more innovative crypto-related products, including those focused on Ether.
Grayscale CEO Michael Sonnenshein revealed plans to file for a covered call ETF, allowing investors to generate income from options based on its spot Bitcoin product.
Cryptocurrency-related stocks saw a mixed response, with notable movements in companies like Riot Platforms, Marathon Digital, Microstrategy, and Coinbase. The ProShares Bitcoin Strategy ETF, tracking Bitcoin futures, recorded a modest gain.
In another significant move, Circle Internet Financial, the entity behind the stablecoin USDC, announced its confidential filing for a U.S. initial public offering, underscoring the growing interest and diversification in the cryptocurrency market.
Read next: Bella Lin: Crafting Safe Havens for Guinea Pigs and Building a Business Empire
