Insights from the First Trading Week of the Weekly Spot Bitcoin ETF Report
The Spot Bitcoin Exchange-Traded Fund (ETF) has completed its first week of trading, marking a significant step in merging cryptocurrency with mainstream financial markets. The launch of the Spot Bitcoin ETF offers investors a regulated and safer option to invest in Bitcoin. In this article, we will analyze the weekly performance of the Spot Bitcoin ETF and explore the potential and implications of these robust investment offerings.
Trading Since Day 1
On the opening day of trading for the highly anticipated U.S.-based spot Bitcoin exchange-traded funds, investors actively traded shares across ten funds approved by the SEC. The Grayscale Bitcoin Trust, the largest Bitcoin fund valued at $28 billion, experienced the highest share turnover, with trading volumes exceeding $2 billion. The total trading volume for that day surpassed $4.6 billion. According to Bloomberg reports, approximately $2.33 billion worth of Grayscale fund shares were traded, almost equal to the total volume traded in all the other new ETFs combined.
Notably, in just the first four days of trading, BlackRock’s spot Bitcoin ETF reached a significant milestone by amassing $1 billion in assets. This makes it the first among the recently launched batch of ETFs tracking spot Bitcoin prices to achieve this level of assets. Fidelity also joined the race and became the second entity to reach the $1 billion asset milestone. The total trading volume for the 11 spot Bitcoin ETFs surpassed $16.4 billion on their sixth trading day, with Grayscale holding the leading market share in spot Bitcoin at nearly 53%.
Grayscale, BlackRock, and Fidelity dominate the market, commanding over 90% of the total volume. The daily trading volume increased to $2.6 billion on January 19, compared to $2.1 billion the previous day. However, these figures are still lower than the $3 billion volume observed last Friday and the initial $4.6 billion on the opening day of trading.
BTC Price Struggles Amid Rising GBTC Outflow
Despite the rising trading volume for the spot Bitcoin ETF, the price of Bitcoin struggles to validate a clear upward move. Bitcoin dropped from its $49K level and is currently aiming to drop below the $40K level. This suggests that the new ETFs are not causing a lack of supply for any new demand associated with the funds.
One possible reason for this is the outflows from Grayscale, which may have freed up supply. Recent purchases of Bitcoin linked to ETFs were somewhat balanced by ongoing withdrawals from the Grayscale Bitcoin Trust. Approximately 10,824 BTC, valued at around $445 million, were sold off. Since its transformation into a spot ETF on January 11, nearly 38,000 BTC have been withdrawn from GBTC.
Grayscale’s massive outflows have resulted in a negative netflow, creating a bearish impact on the BTC price. Another potential reason for the outflows from Grayscale is the ETF’s 1.5 percent expense ratio, which is higher compared to the 20-39 basis points of the other new funds, most of which have waived or reduced their fees for several months. It is difficult to understand why any rational investor would pay more than three times the fee for a fund that holds the same asset.
Grayscale Investment CEO Michael Sonnenshein stated in a recent interview that most of the 11 spot Bitcoin ETFs approved by the U.S. SEC are unlikely to succeed. These ETFs, which started trading soon after their approval on January 10, are competing by lowering fees to 0.2%-0.4%, with some offering temporary fee waivers. In contrast, Grayscale charges up to 1.5% without waivers.
In conclusion, the Spot Bitcoin ETF has made significant strides in merging cryptocurrency with mainstream financial markets. Despite the challenges faced by Bitcoin’s price and the outflows from Grayscale, the trading volume for the spot Bitcoin ETF remains strong. It will be interesting to observe how these ETFs evolve and the impact they have on the overall cryptocurrency market.