The long-awaited arrival of Bitcoin exchange-traded funds (ETFs) in the United States has the crypto community buzzing. On January 11, the first day of trading for recently approved spot Bitcoin ETFs, BlackRock’s iShares Bitcoin Trust (IBIT ) saw significant early interest.
By mid-morning, IBIT had already traded $2 million worth of shares, an impressive volume for an ETF’s opening day, according to senior analyst Eric Balchunas .
While crypto enthusiasts celebrated the ETF milestone, some wondered if the funds might divert investment away from actual Bitcoin (BTC). The thinking is that new crypto investors may opt for the ETF wrapper rather than deal with custodying coins themselves. An unlikely tale for long-term BTC holders who know their way around a crypto wallet, but more plausible for less tech-savvy investors that jumped in more recently.
According to VanEck’s Matthew Sigel, ETFs are seeing great interest from those already invested in the coin. In a X space hosted by The Block, he said: “I heard from a pretty well placed source that Blackrock has more than $2 billion lined up in week one in new incremental flows from existing Bitcoin holders who are adding to positions — I can’t vouch for that. But, you know, that’s what everyone is doing. Just making phone calls and trying to find the folks who can write checks into these products.”
According to Ryan Selkis , founder of Messari, the real question isn’t how much inflow to expect into Bitcoin ETFs, but about rotation—the process of selling assets to buy others. What’s important is “how much bitcoin will *rotate* from GBTC to lower fee options in 2024. My bet is that outflows from GBTC match inflows to all new products.”
Others believe rotation will be out of Bitcoin, and Bitcoin ETFs, and into Ethereum (ETH) as investors anticipate potential Ether ETFs. BlackRock had previously filed an S-1 form with the United States Securities and Exchange Commission (SEC) for its iShares Ethereum Trust. The application has yet to receive approval.
Of course, it’s still early days for the Bitcoin ETF market. Some, including Valkyrie co-founder Steven McClurg, predict over $10 billion may flow into the funds by year-end, but trading volumes could fluctuate wildly in the meantime. How asset flows between the ETFs and underlying Bitcoins evolve remains to be seen.
So far, the effect on Bitcoin’s price is positive, but not seismic. Since the SEC approved the Bitcoin ETF, the cryptocurrency’s price has seen a modest 4% increase.
For now, investors seem keen to get Bitcoin exposure however they can. BlackRock saw strong initial interest in its trust, with nearly $3 million exchanging hands barely six hours into launch day. Rival issuer Grayscale also debuted a Bitcoin fund on January 11th, with their shares rising 2% in pre-market trading.
Such an enthusiastic reception bodes well for both the ETF issuers and crypto broadly. While Grayscale, BlackRock and others battle to be the top Bitcoin fund, their success helps validate digital assets to more conservative investors.
That could resonate for years, as the ETFs make Bitcoin more accessible for Wall Street. Crypto holders will be watching closely to see if the funds complement the underlying asset, and the crypto narrative in general, or competes with it.