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The Spot Bitcoin Exchange-Traded Fund (ETF), a new product in the financial market, has just completed its first week of trading. This event marks several key milestones in the blending of crypto with traditional financial markets. Launched amid high expectations, the Spot Bitcoin ETF is a crucial initiative, providing investors with a more regulated and safer option for exploring Bitcoin. In this article, we aim to present weekly Spot Bitcoin ETF insights, highlighting the potential and implications of these robust investment offerings.
Spot Bitcoin ETF Trading Since Day One
On the opening day of trading for the highly anticipated US-based Bitcoin spot exchange-traded funds, investors actively engaged in trading shares in ten SEC-sanctioned funds. Early volumes revealed that the Grayscale Bitcoin Trust, the largest Bitcoin fund valued at $28 billion, recorded the highest turnover, with trading volumes exceeding $2 billion. The cumulative trading volume for that day exceeded $4.6 billion.
Bloomberg reports indicate that approximately $2.33 billion in Grayscale fund shares were traded throughout the day, a figure that nearly equals the total volume traded in all other new ETFs combined.
Notably, in the first four days of trading, BlackRock's spot Bitcoin exchange-traded fund (ETF) hit a major milestone, amassing $1 billion in assets. The feat positions it as the first among the batch of recently launched ETFs that track bitcoin spot prices to reach this level of assets, according to JP Morgan data. Subsequently, Fidelity entered the race and became the second entity to reach the milestone of $1 billion in assets.
Total trading volume for the 11 spot Bitcoin ETFs exceeded $16.4 billion on their sixth day of trading on Friday. As of January 19, Grayscale held the top spot Bitcoin market share, with nearly 53% ownership.
Grayscale, BlackRock and Fidelity remain the predominant players, accounting for over 90% of total volume. Daily volume saw an increase, reaching $2.6 billion on January 19, up from $2.1 billion the day before. These figures remain considerably lower than the $3 billion volume seen last Friday and the initial $4.6 billion on the first day of trading.
Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, noted that Bitcoin spot ETFs from BlackRock and Fidelity led in terms of new capital inflows among 11 cryptocurrency-based instruments traded on various exchanges. Each of these two funds has attracted more than $400 million in inflows. As a result, Bitcoin ETFs have surpassed silver ETFs in size in the United States due to significant market interest.
BTC Prices Struggle Amid Growing GBTC Outflow
Amid increasing trading volume for the Bitcoin Spot ETF, the BTC price continues to struggle to validate a clear upward move. Interestingly, Bitcoin fell from its $49,000 level and is currently aiming to fall below the $40,000 level. This could indicate that the appearance of the new ETFs does not lead to a lack of supply for possible new demand linked to the funds.
It's possible that Grayscale's releases freed up supply. Recent Bitcoin purchases linked to exchange-traded funds (ETFs) have been somewhat offset by ongoing withdrawals from the Grayscale Bitcoin Trust (GBTC). Around 10,824 BTC, valued at around $445 million, were sold. Since its transformation into a spot ETF on January 11, almost 38,000 BTC have been withdrawn from GBTC.
Massive Grayscale outflows send Netflow into the negative region, creating a bearish impact on BTC price. Another potential reason why Grayscale could have been the target of investor outflows is the ETF's 1.5% expense ratio, high compared to the 20 to 39 basis points of other new funds, including most have waived or reduced their fees several months ago. It's difficult to understand why a rational investor would pay fees more than three times as much for a fund holding the same asset.
Michael Sonnenshein, CEO of Grayscale Investment, said in a recent interview at the World Economic Forum in Davos that most of the 11 spot Bitcoin ETFs approved by the US SEC are unlikely to succeed.
These ETFs, which began trading shortly after their approval on January 10, compete by lowering fees to between 0.2% and 0.4%, with some offering temporary fee waivers. In contrast, Grayscale, the largest Bitcoin holder among these ETF issuers, charges up to 1.5% without a waiver.
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