Weekly Spot Bitcoin ETF Report: Insights After Its First Trading Week

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The Spot Bitcoin Exchange-Traded Fund (ETF), a new product in the financial market, has just wrapped up its first week of trading. This event marks several key milestones in blending crypto with mainstream financial markets. Launched amid high expectations, the Spot Bitcoin ETF is a crucial move, providing a more regulated and safer option for investors to explore Bitcoin. In this piece, we aim to unpack the weekly insights of the Spot Bitcoin ETF, shedding light on the potential and implications of these robust investment offerings.

Spot Bitcoin ETF Trading Since Day 1

On the opening day of trading for the eagerly awaited U.S.-based spot bitcoin exchange-traded funds, investors actively engaged in trading shares across ten funds sanctioned by the SEC. Initial volume figures revealed that the Grayscale Bitcoin Trust, the biggest bitcoin fund valued at $28 billion, experienced the highest share turnover, with trading volumes exceeding $2 billion. The cumulative trading volume for that day surpassed $4.6 billion.

Bloomberg reports indicate that approximately $2.33 billion worth of Grayscale fund shares were traded throughout the day, a figure that nearly equals the total volume traded in all the other new ETFs combined.

Notably, in just the first four days of trading, BlackRock’s spot bitcoin exchange-traded fund (ETF) achieved a significant milestone, amassing $1 billion in assets. This feat positions it as the first among the recently launched batch of ETFs that track spot bitcoin prices to reach this level of assets, according to data from J.P. Morgan. Subsequently, Fidelity entered the race and became the second entity to attain the $1 billion asset milestone.

The total trading volume for the 11 spot bitcoin ETFs surpassed $16.4 billion on their sixth trading day, Friday. As of January 19, Grayscale holds the leading market share in spot Bitcoin, with nearly 53% ownership. 

Grayscale, BlackRock, and Fidelity remain the predominant players, commanding over 90% of total volume. The daily volume saw an increase, surging to $2.6 billion on 19 January compared to $2.1 billion the previous day. These figures are still considerably lower than the $3 billion volume observed last Friday and the initial $4.6 billion on the first day of trading.

Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, noted that BlackRock and Fidelity’s spot bitcoin ETFs were leading in terms of new capital inflows among the 11 cryptocurrency-based instruments trading across various exchanges. Each of these two funds has attracted more than $400 million in inflows. As a result, Bitcoin ETFs have outpaced silver ETFs in size in the U.S. due to significant market interest. 

BTC Price Struggles Amid Rising GBTC Outflow

Amid rising trading volume for spot Bitcoin ETF, BTC price continues to struggle in validating a clear upward move. Interestingly, Bitcoin dropped from its $49K level, and is currently aiming to drop below the $40K level. This could indicate that the appearance of the new ETFs is not causing a lack of supply for any new demand linked to the funds.

It’s possible that outflows from Grayscale could have freed up supply. Recent purchases of Bitcoin linked to Exchange-Traded Funds (ETFs) were somewhat balanced by ongoing withdrawals from the Grayscale Bitcoin Trust (GBTC). Approximately 10,824 BTC, valued at around $445 million, were sold off. Since its transformation into a spot ETF on January 11, nearly 38,000 BTC have been withdrawn from GBTC.

Grayscale’s massive outflows are sending the Netflow to the negative region, creating a bearish impact on BTC price. Another potential reason Grayscale could have been targeted by investors for outflows, is the ETF’s 1.5 percent expense ratio, steep in comparison with the 20-39 basis points at the other new funds, most of which have waived or reduced their fees for several months. It is difficult to see why any rational investor would pay more than three times the fee for a fund that holds the same asset.

Grayscale Investment CEO Michael Sonnenshein, in a recent interview at the World Economic Forum in Davos, stated that most of the 11 spot Bitcoin ETFs approved by the U.S. SEC are unlikely to succeed.

These ETFs, which started trading soon after their approval on January 10, are competing by lowering fees to 0.2%-0.4%, with some offering temporary fee waivers. In contrast, Grayscale, the biggest Bitcoin holder among these ETF issuers, charges up to 1.5% without waivers.

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