The launch of the United States' first Bitcoin spot Exchange-Traded Funds (ETFs) has sparked a frenzy among investors, leading to impressive trading volumes on the very first day of listing. According to Dow Jones Market Data, the combined trading volume of ten listed Bitcoin spot ETFs in the US reached $4.6 billion by Thursday afternoon.
These ETFs include BlackRock's iShares Bitcoin Trust, the Grayscale Bitcoin Trust (which transitioned from a fund), and the ARK 21Shares Bitcoin ETF, a joint effort between ARK Invest and 21Shares. However, Hashdex, a Brazilian fund manager, was unable to list its product due to ongoing reviews by the Securities and Exchange Commission (SEC).
Large institutions like Vanguard, Goldman Sachs, and Bank of America have remained cautious about entering the Bitcoin ETF space, given the inherent investment risks associated with Bitcoin. However, with a relatively small number of institutions currently in the market, Thursday's trading frenzy could just be the beginning, with more institutions potentially joining in, likely sparking a sustained market rally.
Grayscale and BlackRock's Bitcoin ETFs surpassed $1 billion in trading volume, and this could be just the start. Dow Jones Market Data indicates that Grayscale, BlackRock, and Fidelity Investments were the biggest winners in this round of trading. Grayscale's Bitcoin ETF accounted for about half of the total trading volume, reaching $1 billion within the first 90 minutes of trading. BlackRock's iShares Bitcoin Trust also exceeded $1 billion in trading volume by the close of the day.
The launch of these new ETF products marked a strong start, as noted by Todd Rosenbluth, a strategist at VettaFi. Charles Ragauss, the trading head at Tidal Financial Group, echoed this sentiment, highlighting the significance of the day's trading for Bitcoin ETFs but noting that it's just the beginning.
After a decade of negotiations and setbacks, the SEC finally conceded to the market, approving the first-ever Bitcoin spot ETFs, with 11 ETFs authorized to start trading on Thursday.
SEC Chairman Gary Gensler clarified that this approval does not equate to regulatory endorsement of Bitcoin, which he described as a "speculative, volatile asset." Both Gensler and his predecessor, Jay Clayton, had previously refused to allow such products.
With the introduction of Bitcoin spot ETFs, Bitcoin's price momentarily surged above $49,000, reaching its highest level since December 2021. At the time of reporting, Bitcoin had slightly risen by 0.77% to $46,303, while Ethereum, the second-largest cryptocurrency, increased by 2.79% to $2,597.95.
The regulatory approval sparked intense competition among issuers, with some even slashing fees significantly below the US ETF industry standard before Thursday's launch. The fee rates for new Bitcoin ETFs range from 0.2% to 1.5%, with many firms offering fee waivers for certain periods or asset ranges. Valkyrie notably reduced its fees twice after launching its Bitcoin ETF and waived fees for the first three months.
Grayscale's conversion of its existing Grayscale Bitcoin Trust into an ETF created the world's largest Bitcoin ETF overnight, managing over $28 billion in assets.
Regarding the potential market growth from Bitcoin spot ETFs, analysts have had significant differences in estimates. Bernstein analysts predict that ETF inflows could exceed $10 billion by 2024, while Standard Chartered analysts believe inflows could reach between $50 billion and $100 billion just this year. Other analysts estimate that inflows could reach $55 billion within five years.
Despite the excitement, major institutions like Vanguard and Goldman Sachs remain cautious about Bitcoin ETFs, citing the risks associated with cryptocurrencies. Sharmin Mossavar-Rahmani, Chief Investment Officer at Goldman Sachs Investment Strategy Group and Wealth Management, expressed skepticism about the value of assets like Bitcoin during a webinar on Thursday.
Besides Vanguard and Goldman Sachs, investors currently cannot trade Bitcoin ETFs on platforms from Citigroup, Bank of America, Edward Jones, and UBS. Some of these funds have not yet received approval from broker-dealer compliance departments, and other brokers either declined or did not respond to media requests for comment.
