Spot Bitcoin ETFs See Success Despite BTC Sell-off After One Week
Mitchell Nixon
The introduction of spot Bitcoin exchange-traded funds (ETFs) in the United States has led to a cryptocurrency sell-off. Despite this, analysts acknowledge that within the ETF industry, these funds have achieved success during their inaugural week of trading.
Since the commencement of spot Bitcoin ETF trading on January 11, Bitcoin’s value has dropped by -17%, falling from almost $49,000 to as low as $40,500 or so this morning, and sits at $41,200 or so as of writing.
While spot Bitcoin ETFs did not trigger a surge in BTC prices during the initial week of trading, contrary to the expectations of some notable investors, industry analysts note that the funds themselves have experienced a successful launch, being one of the most triumphant ETF launches in terms of trading volumes, witnessing 10 funds amassing a combined volume of $10 billion within the initial three days.
Bloomberg ETF analyst Eric Balchunas observed unprecedented activity and volumes in spot Bitcoin ETFs since their debut. He pointed out that all 500 ETFs introduced in 2023 had reached a combined volume of $450 million thus far, a stark 2,100% less than the spot ETFs achieved in just three days.
“It is hard to get volume. Harder than flows even and definitely harder than assets. Because volume has to form naturally in the marketplace, can’t really be faked. And it gives an ETF staying power,” Balchunas stated on X.
The Grayscale Bitcoin Trust ETF (GBTC) dominated the trading volumes, contributing roughly 50% to the combined $10 billion volume within the initial three days. As per Yahoo Finance data, GBTC has traded over $6.3 billion, managing around $2 billion daily during the first two days of trading.
Post the ETF launch, GBTC experienced significant selling, witnessing net outflows of $1.2 billion in the initial three trading days. While GBTC offloaded substantial amounts of Bitcoin, other spot BTC ETFs have been increasing their BTC holdings.
In the first four days post-launch, GBTC sold a total of 27,122 BTC, equivalent to 4.4% of its initial holdings of 619,200 BTC, as reported by Bitcoin investor Capital15C on X. Meanwhile, other ETF issuers such as BlackRock, Fidelity, and ARK Invest collectively purchased at least 40,000 BTC.
BlackRock’s iShares Bitcoin Trust (IBIT), the second-largest spot Bitcoin ETF in terms of holdings, saw its assets rise from 2,621 BTC on Jan. 11 to a peak of 25,067 BTC on Jan. 17.
Based on the most recent data provided by ETF issuers, spot ETFs collectively possess 651,819 BTC, accounting for 3.32% of the total 19.6 million Bitcoins ever issued.
The introduction of spot Bitcoin ETFs in the United States is widely perceived as a “sell the news” event, and analysts speculate that additional pressure may arise from the futures market.
Fidelity’s director of global macro, Jurrien Timmer, expressed the view that the current market dynamics suggest a short-term positioning adjustment rather than a long-term trend reversal. However, Timmer noted that the unwinding of more than 13,000 futures contracts is expected to introduce some volatility in the price action over the coming weeks, as stated in his commentary on X.
VanEck’s head of digital assets research, Matthew Sigel, suggests that the recent brief correction in Bitcoin’s value may have resulted from increased activity in coin selling by Bitcoin miners. With the anticipated Bitcoin halving in April 2024 and the potential involvement of institutions, Sigel anticipates that Bitcoin is poised to reach new record highs following the U.S. presidential elections in the fourth quarter of 2024, as conveyed in his remarks:
“We are pleased to see the ETFs trading with such liquidity, tight spreads, and small discounts to NAVs. We expect institutional investors to accelerate their purchases over coming quarters as their asset allocation models, including Bitcoin, are released to the market.”
Standard Chartered predicts that spot Bitcoin ETFs may draw in investments ranging from $50 billion to $100 billion in 2024, potentially propelling BTC’s price to reach $200,000 by the conclusion of 2025.