The U.S.-listed bitcoin exchange-traded funds (ETFs) saw $4.6 billion worth of shares trade hands as of Thursday afternoon, LSEG data has revealed.
According to LSEG data, many 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 (IBIT.O), Grayscale Bitcoin Trust (GBTC.P), and ARK 21Shares Bitcoin ETF (ARKB.Z), among others – began trading Thursday morning, kicking off a fierce competition for market share.
However, and as noted by LSEG data, Grayscale, BlackRock and Fidelity dominated trading volumes.
According to Todd Rosenbluth, strategist at VettaFi, noted that trading volumes have been relatively strong for ETF products, but a day trading cannot be used as a yardstick.
He noted that, “Trading volumes have been relatively strong for new ETF products,” “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.
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.
Recall that the SEC had earlier rejected all spot BitcoinETFs 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.”
Also, important to note is the fact that 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.
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.
Physical representations of the bitcoin cryptocurrency are seen in this illustration taken October 24, 2023.
Grayscale was approved to convert its existing bitcoin trust into an ETF on Thursday, overnight creating the world’s largest BitcoinETFs with more than $28 billion in assets under management.
Analysts at Bernstein estimated that flows will build up gradually to cross $10 billion in 2024, while Standard Chartered analysts this week said the BitcoinETFs could draw $50 billion to $100 billion this year alone. Other analysts have said inflows could be $55 billion over five years.
As the BitcoinETFs 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.
But as already noted by Jason Stoneberg, director of product strategy at Invesco, whose ETF with Galaxy Digital debuted on Thursday, Trading volume, internal plumbing and the number of participants involved “are critically important to driving the spreads to a good spot
However, 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.
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