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Bitcoin ETFs Beat BTC: A Historic First Day

Last Updated January 12, 2024 9:01 AM
Teuta Franjkovic
Last Updated January 12, 2024 9:01 AM

Key Takeaways

  • The launch of Bitcoin ETFs is a milestone for the crypto industry, signifying wider mainstream acceptance.
  • BlackRock’s iShares Bitcoin Trust made a strong debut.
  • The approval of options tied to Bitcoin ETFs could be the next step in Wall Street’s adoption of crypto-related financial products.

Despite mixed opinions on Wall Street regarding the investment potential of cryptocurrencies, Thursday was a day of vindication for Bitcoin enthusiasts as the first US exchange-traded funds (ETFs) directly investing in the leading digital currency officially commenced trading.

This long-awaited launch occurred just a day after the United States Securities and Exchange Commission (SEC) approved them. This marked the culmination of a campaign spanning over a decade by the digital asset industry.

Bitcoin ETFs Make Bullish Debut, Generating $4.6B in Trading Volume

The group of nearly a dozen funds, which includes offerings from prominent investors like BlackRock and Fidelity Investments, experienced a robust start.  About $4.6 billion worth of shares in the projects were traded in their first day on the market. Some people in the industry view these ETFs as a pivotal step towards wider acceptance among everyday investors and a potential driver for further growth in the cryptocurrency space.

Eric Balchunas, senior ETF analyst at Bloomberg Intelligence said :

“Easily the biggest splash in ETF history for a first day. No matter where you look, it’s superseded expectations.”

At one moment, Bitcoin experienced a notable surge, briefly surpassing the $49,000 mark, reaching levels not seen since 2021. However, it later fell, settling at around $46,075 as of 9:30 pm EST. Alongside Bitcoin’s fluctuation, other major cryptocurrencies exhibited mixed performance as traders and speculators evaluated the market’s outlook.

BTC price
Credit: CoinGecko

Record-Breaking Trading Volume, Grayscale Trust Leads the Way

Thursday’s launch of the new ETFs witnessed some record-setting activities. Notably, the Grayscale Bitcoin Trust experienced the largest-ever first-day turnover for an ETF,  with $2.3 billion worth of shares traded. It’s important to note that while the Grayscale Bitcoin Trust debuted as an ETF on this day, it has been operational in a trust structure since 2013.

This prior existence gave it a significant advantage in terms of asset size. The trust already managed nearly $27 billion in assets before its transformation into an ETF.

 

It’s important to recognize, however, that trading volume alone doesn’t provide a complete understanding of the nature of the transactions, whether they are predominantly buying or selling, or the actual investor inflows. Due to the specific manner in which these funds process and settle trades, the net flows — indicating the total amount of money moving into or out of these products — will likely remain unclear until at least Friday.

This lag in data means a more accurate and comprehensive picture of investor behavior and fund performance won’t become available until after the settlement period.

BlackRock’s iShares Bitcoin ETF Captures 22% of Market Share

BlackRock’s iShares Bitcoin Trust, trading under the ticker IBIT on the Nasdaq, made a significant impact on its debut. The fund nearly reached $1 billion  in trading volume. This accounted for 22% of the total volume across all 10 spot Bitcoin ETFs that were active on Thursday.

Despite a strong start in the morning,  IBIT  experienced a downturn by the end of the day. It closed at $26.62, marking a 4.6% decrease from its opening price. The fund had a strong beginning, with three million shares traded before the markets even opened. However, it seemed to lose momentum as the day progressed.

It’s noteworthy that BlackRock, known for its iShares brand of ETFs, has a history of strong debuts  for its exchange-traded funds. The initial interest and trading volume seen with IBIT align with this.

Hashdex Bitcoin ETF’s Approval Revoked by SEC, Casting Doubt 

In a surprising turn of events, the Hashdex Bitcoin ETF has been pulled from the list  of newly approved spot Bitcoin funds by the SEC. The regulator’s initial announcement included Hashdex among the approved funds, but a subsequent clarification from Hashdex itself revealed  that the ETF had not received final approval and would not be launching as initially planned.

The Hashdex announcement  said the ETF was still working towards obtaining the necessary approvals and hoped to launch in the near future. However, the removal from the SEC’s list has raised uncertainty about the ETF’s prospects. This could, in turn, dampen investor enthusiasm for spot Bitcoin funds in general.

The SEC’s decision to initially approve Hashdex has been met with criticism from some quarters, who argue that the agency’s approval process is opaque and inconsistent. Others have defended the SEC, noting that the agency is tasked with protecting investors and must carefully consider the potential risks associated with new financial products.

According to the company :

“The fund, which is currently a futures product, presently does not hold spot Bitcoin in its portfolio. At a later date, the fund will change its name and change its investment strategy to permit spot Bitcoin in its portfolio.”

Grayscale Bitcoin Trust Breaks Records with Massive Spike in Trading Volume

While much of the focus was on BlackRock during the day, Grayscale, a crypto native digital asset manager, achieved a significant milestone  on its own.

The Grayscale Bitcoin Trust, recorded an all-time high in daily trading volume with 56 million shares traded on Thursday. This fund stands out in the lineup of Bitcoin ETFs due to its unique history. It was originally a Bitcoin investment product targeted at accredited investors and has a decade-long track record.

Options on Bitcoin ETFs on the Horizon

The next significant phase in Wall Street’s adoption of cryptocurrency-related financial products is anticipated to be the approval of options tied to these Bitcoin ETFs. Options are derivative instruments which many investment professionals use. They offer a means to speculate on future gains or to hedge against potential losses. These financial tools are crucial for sophisticated investment strategies and risk management.

Cboe Global Markets Inc., a major player in the financial markets, is currently projecting that the SEC will greenlight the trading of options on these Bitcoin ETFs later in 2024. This development would mark an advance in the integration of cryptocurrency into conventional financial markets, providing investors with more tools and strategies to engage with digital assets. The approval of options would not only underscore the growing acceptance of cryptocurrencies in mainstream finance but also potentially increase the liquidity and stability of these markets.

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