Bitcoin exchange-traded funds (ETFs) listed on U.S. exchanges witnessed a trading volume of $4.6 billion shortly after their debut, marking a historic moment for the cryptocurrency industry.
The ETFs, approved by the U.S. Securities and Exchange Commission (SEC) on Wednesday, signal a test for digital assets’ broader acceptance as mainstream investments.
Eleven spot bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, commenced trading, initiating intense competition for market share. The trading volumes leading were Grayscale, BlackRock, and Fidelity, according to data from LSEG.
Regulatory Approval Spurs Bitcoin Price Surge:
The SEC’s approval of the bitcoin ETFs triggered a surge in bitcoin prices to their highest levels since December 2021. Currently, bitcoin is valued at $46,303, while ether, the second-largest cryptocurrency, stands at $2,597.95.
While the ETF launches generated enthusiasm, some industry executives and institutions cautioned. Vanguard, the largest mutual fund provider, stated it has no plans to offer the new batch of spot bitcoin ETFs on its platform, emphasizing the high-risk nature of bitcoin as an investment. SEC Chair Gary Gensler clarified that the approvals did not endorse Bitcoin, characterizing it as a “speculative, volatile asset.”
Intense Competition for Market Share:
The regulatory green light triggered fierce competition among issuers, leading to fee cuts well below the industry standard. Fees for the new bitcoin ETFs range from 0.2% to 1.5%, with some firms waiving fees entirely for specific periods or asset thresholds.
Grayscale’s approval to convert its existing bitcoin trust into an ETF instantly created the world’s largest ETF, with over $28 billion in assets.
Estimates on the potential inflows into spot bitcoin ETFs vary widely, with Bernstein predicting gradual growth to surpass $10 billion in 2024, while Standard Chartered suggests potential flows of $50 billion to $100 billion in 2023 alone. Bid-ask spreads, and trading volumes are closely monitored indicators of the ETFs’ success in the market.
Lingering Skepticism and Caution:
Despite the euphoria surrounding the ETF approvals, some analysts warn of premature optimism. The broader investment community still views cryptocurrencies as risky assets, and recent scandals, such as the FTX exchange implosion in 2022, contribute to investor wariness.
Vanguard and Goldman Sachs have expressed reservations about investing in cryptocurrencies, emphasizing the focus on traditional asset classes.