Bitcoin ETF: a milestone in the history of cryptocurrencies or the decline of the BTC spirit?
The fact that ETFs are causing such a stir in the media and in the financial and Bitcoin community is mainly because many market observers see these ETFs as a kind of seal of approval from Wall Street or the traditional financial world. Bitcoin went from a nerd toy project to a recognized asset class in 15 years. That's really remarkable.
I don't see it contradicting the spirit of Bitcoin. Bitcoin has always been conceived as inclusive and free money that every individual and company can use. With the plan to one day represent a global alternative to so-called fiat currencies, it was always clear that one day financial giants and even states would also use Bitcoin. Bitcoin ETFs or perhaps Bitcoin-backed currencies in the distant future are not a contradiction.
What was the first day of trading for Bitcoin ETFs on January 11? Were the issuers' expectations met?
Exactly. After the US Securities and Exchange Commission (SEC) granted approval on January 10, 2024, trading could begin last Thursday. This first day was really fantastic, especially in terms of trading volumes. In total, shares of the ETF were sold for more than $4.5 billion. According to initial reports, there were more than 700,000 individual transactions.
Two of the eleven exchange-traded funds were especially in the spotlight: Grayscale's $GBTC, which converted from a trust fund to an ETF and already manages around $27 billion worth of Bitcoin. There was also market leader BlackRock's iShares Bitcoin Trust, which attracted a lot of attention.
With a trading volume of over $2.3 billion, $GBTC broke the record for the largest trading volume for an ETF on the first day of trading. BlackRock's IBIT at least reached the top 5 in history. This is particularly notable because the ETF started out alongside ten other relatively identical competing products. If it hadn't been like that, pole probably would have been possible.
How has the price of Bitcoin behaved? Were there any big price increases?
Interestingly, the price of Bitcoin reacted quite moderately despite the high trading volume. After an initial rise to over $49,000, there was a steady sell-off back to around $45,000. This had several reasons. On the one hand, the conditions were somewhat distorted due to the special case of Grayscale. Since the former trust fund's fees are approximately five times higher than those of direct competition, numerous sales of GBTC occurred. Although some of them were reallocated to other ETFs, this was not always possible, which leads us directly to the second reason why the price barely reacted.
In particular, the financial giant Vanguard, number 2 after BlackRock, allows its clients to sell GBTC shares, but does not include the new Bitcoin ETFs in its product range. If most clients are currently denied access to ETFs and only allowed downward pressure on prices, it is not surprising that prices have barely been able to rise.
So-called over-the-counter businesses certainly played a role as well. These are transactions that are carried out outside the usual exchanges. They are often used by large institutional investors to buy or sell large amounts of assets such as Bitcoin without directly influencing the market. According to reports, there were especially many OTC purchases last Thursday.
Where can investors buy the new Bitcoin ETFs?
Unfortunately, this is currently not possible in Germany. Due to local regulations, EU citizens are not allowed to invest in exchange-traded funds that only represent one asset. I have heard reports that some brokerage services want to offer ETFs, but some requirements would still have to be met.
What will happen next with Bitcoin and ETFs?
Regardless of the ETFs and their performance, Bitcoin will continue on its way. The next milestone will be in April with the so-called “Halving”. For this event, the amount of newly distributed BTC will be halved. The resulting supply reduction has often led to price increases and increased interest in Bitcoin in the past. But ETFs will certainly continue to be popular in the investment world. Once pension funds and the like also start investing a small portion of their assets in Bitcoin ETFs, we will see a big impact on the price. In short: Bitcoin's future in its role as an asset currently looks brighter than ever.
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Roman Reher
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Roman Reher
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