Bitcoin, the largest cryptocurrency by market capitalization, saw a significant surge in trading volume following the debut of 11 spot Bitcoin exchange-traded funds (ETFs) on U.S. stock exchanges on Thursday.
By 10:00 a.m. ET, Bitcoin’s trading volume had increased by 40 percent, according to CoinGecko. Within the same period, the token’s price rose by over eight percent, trading past the $48,000 line. It marked the highest price point for the token since December 2021.
David Mann, the head of ETF product and capital markets at Franklin Templeton, said there would be “pretty strong” inflows right after the new spot ETFs entered the market. Previously, after the launch of Bitcoin futures ETFs in late 2021, the Bitcoin market saw an inflow of $1 billion in the first two days.
“Whether there’s an initial pop and then a slow climb thereafter, I guess we’ll see. But given the excitement and given what we think is a sizeable amount of investors who want this particular exposure with an ETF form, we are certainly proceeding as if it’s going to be gathering assets quickly,” said Mann, as quoted by the Financial Times.
Meanwhile, Bitwise chief investment officer Matthew Hougan urged investors to manage their expectations. Hougan said he had heard “ridiculous” flow targets for Bitcoin ETFs in the first year.
“For what it’s worth, that would be extraordinary,” he said. “That’s not what the ETF industry has seen.”
Bernstein analysts predicted that spot Bitcoin ETFs would draw over $10 billion by the end of this year. Meanwhile, earlier this week, analysts at Standard Chartered estimated that the new products could draw $50 billion to $100 billion in 2024 alone.
First trading day
Nine new ETFs and two conversions of crypto-related financial products began trading on Thursday morning at the New York Stock Exchange, Nasdaq and Cboe exchanges. Just the day before, the U.S. Securities and Exchange Commission (SEC) approved the offering of spot Bitcoin ETFs on these traditional exchanges.
The SEC’s approval came after the federal agency previously rejected all spot Bitcoin ETFs due to concerns about investor protection. SEC Chairman Gary Gensler said on Wednesday that the approvals did not necessarily mean an endorsement of the digital currency, describing Bitcoin as a “speculative, volatile asset.”
As of Thursday afternoon, London Stock Exchange Group (LSEG) data showed that U.S.-listed Bitcoin ETFs had hit a total trading value of $4.6 billion. Based on the LSEG data, Grayscale Bitcoin Trust, BlackRock’s iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund dominated in terms of trading volume.
VettaFi strategist Todd Rosenbluth described the trading volumes for all new ETF products to be “relatively strong.” However, Rosenbluth said investors should not only look at a single day’s trading, arguing that the race for market domination would happen in the longer term.
The ETF issuers cut fees for their products significantly below the U.S. ETF industry’s standard ahead of the launch to attract investors. Fees on the new spot Bitcoin ETFs range from 0.2 to 1.5 percent.
Several issuers offer to waive fees for a certain period or a certain total asset value (in dollars). Valkyrie, for example, slashed its fees for the second time to 0.25 percent and waived them for the first three months.
Despite the products’ popularity, some traditional financial institutions remain cautious about offering this type of instrument. Vanguard said the firm did not plan to launch crypto investment products. The Valley Forge-based investment company said it would focus on core assets like stocks and bonds because they are a “well-balanced, long-term investment portfolio.”
Goldman Sachs chief investment officer Sharmin Mossavar-Rahmani also argued that cryptocurrencies are not an asset class that people should invest in, questioning their intrinsic value.