US bitcoin ETFs see $4.6B in volume in first day of trading
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[January 12, 2024] By
Hannah Lang, Suzanne McGee and Manya Saini
(Reuters) - U.S.-listed bitcoin exchange-traded funds (ETFs) saw $4.6
billion worth of shares trade hands as of Thursday afternoon, according
to LSEG data, as investors jumped into the landmark products approved by
the U.S. securities regulator on Wednesday.
The products mark a watershed moment for the cryptocurrency industry
that will test whether digital assets - still viewed by many
professionals as risky - 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, among 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 new ETF products," said
Todd Rosenbluth, strategist at VettaFi. "But this is a longer race than
just a single day's trading.
The green light from the U.S. Securities and Exchange Commission for the
products finally came late on Wednesday, following a decade-long tussle
with the crypto industry.
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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 new 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 statement on
Wednesday that the approvals were not an endorsement of bitcoin, calling
it a "speculative, volatile asset."
The ETF launches lifted the price of bitcoin up to 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 among
the issuers, some of whom slashed the fees for their products well below
the U.S. ETF industry's standard even before Thursday's launch.
Fees on the new 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 started 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
more than $28 billion in assets under management.
Estimates for how much spot bitcoin ETFs could reel in vary widely.
Analysts at Bernstein estimated that flows will build up gradually to
cross $10 billion in 2024, while Standard Chartered analysts this week
said the ETFs could draw $50 billion to $100 billion this year alone.
Other analysts have said inflows could 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 buy into an ETF and the price it can be sold. ETFs with narrower
spreads are typically viewed as more desirable.
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Physical representations of the bitcoin cryptocurrency are seen in
this illustration taken October 24, 2023. REUTERS/Dado Ruvic/Illustration/File
Photo
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Trading volume, internal plumbing and the number of participants
involved "are critically important to driving the spreads to a good
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 might
be premature. The broader investment community still views
cryptocurrencies as risky, 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 remains on core asset
classes such as stocks, bonds and cash, 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 think about it, where is there any value to something like
bitcoin?," she said. "We don’t think it is an asset class to invest
in."
CRYPTO STOCKS GAIN
Still, some expect the products to pave the way for even more
innovative 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 allow
investors to generate income from options on its spot bitcoin
product.
Cryptocurrency-related stocks initially climbed higher on Thursday,
but ended the day lower, with bitcoin miners Riot Platforms and
Marathon Digital dropping 15.8% and 12.6% respectively.
Bitcoin investor Microstrategy fell 5.2% and crypto exchange
Coinbase 6.7%. The ProShares Bitcoin Strategy ETF, which tracks
bitcoin futures, gained 0.44%.
Also on Thursday, Circle Internet Financial, the company behind
stablecoin USDC, said it had confidentially filed for a U.S. initial
public offering. Circle controls the issuance and governance of USDC,
a cryptocurrency pegged to the U.S. dollar.
(Reporting by Manya Saini in Bengaluru, Hannah Lang in Washington
and Suzanne McGee; Additional reporting by Niket Nishant in
Bengaluru, Medha Singh, Davide Barbuscia and Noel Randewich; Editing
by Arun Koyyur and Nick Zieminski)
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