Spot Bitcoin ETFs One Week After Launch: What To Know
It was a watershed event for Bitcoin advocates and the broader crypto sector when the Securities and Exchange Commission (SEC) approved listing the first spot Bitcoin exchange-traded funds in the United States. The move ended years of speculation and established a standard for incorporating digital assets into the traditional financial markets.
Success Signs
The recent launch of spot Bitcoin exchange-traded funds (ETFs) in the United States has sparked a sell-off in the broader crypto market. Despite a 6.6% drop in Bitcoin’s value, dropping from nearly $49,000 to $42,876 since the start of ETF trading on January 11, industry observers believe that ETFs have shown long-term success signs.
Contrary to the forecasts of notable investors who predicted that the ETFs would cause a spike in Bitcoin values, the first week of trading differed from this expected outcome. On-chain data highlight the significant decrease in BTC’s value, especially in the first two trading days, dropping to an intra-week low of $41,753.
Spot Bitcoin ETF Early Days of Trading
After the historic introduction of spot Bitcoin ETFs in the US, trading volumes reached unprecedented heights in the first three days. Ten of the eleven approved Bitcoin ETFs generated $10 billion in trading volume.
According to Eric Balchunas, a Bloomberg ETF analyst, the spot Bitcoin ETFs’ performance has been spectacular. Balchunas pointed out that the 500 ETFs announced in 2023 had only managed to acquire a combined volume of $450 million up to this moment.
This indicates a significant 2,100% difference from the impressive activities of spot Bitcoin ETFs in just three days. In his analysis, Balchunas stressed the difficulty of achieving substantial trading volume, claiming it is more complex than attracting capital flows or developing assets.
GBTC Leads ETF Trading Volume
The Grayscale Bitcoin Trust ETF (GBTC) accounted for over half of the total trading volume, which reached $10 billion in the first three days. Per on-chain data, GBTC’s trade volume has exceeded $6.3 billion thus far, with a daily turnover of about $2 billion during the first two days of trading.
Surprisingly, the ETF’s release resulted in significant BTC sell-offs, with net outflows of $1.2 billion recorded within the first three days of trading. These sell-offs highlight the market’s dynamic response to the debut of the GBTC ETF, indicating increased investor activity and liquidity.
Grayscale Offloads 27,000 BTC
Following the US SEC’s approval of a spot BTC ETF, Grayscale Bitcoin Trust ETF (GBTC) disposed of 4.4% of its total holdings of 619,200 BTC (about 27,122 BTC), according to Bitcoin investor Capital15C. Conversely, other leading ETF issuers, like ARK Invest, BlackRock, and Fidelity, collectively purchased an average of 40,000 BTC during the same period.
Furthermore, BlackRock’s iShares Bitcoin Trust (IBIT), the second-largest Bitcoin ETF by holdings, significantly increased its asset base from 2,621 BTC on January 11 to 25,067 BTC by January 17. Cumulative data from ETF providers shows that spot Bitcoin ETFs possess 651,819 BTC.
The Road Ahead
Meanwhile, Jurrien Timmer, Fidelity’s Director of Global Macro, sees the recent market correction as a temporary repositioning rather than a long-term trend reversal. Over 13,000 futures contracts are being unwinded, which may contribute to higher market volatility in the coming weeks.
According to Matthew Sigel, VanEck’s Head of Digital Assets Research, Bitcoin miners’ increased selling activity has influenced the recent short-term decline. Sigel believes that growing institutional engagement and the impending Bitcoin halving in April 2024 would catapult BTC’s price to new heights.
Meanwhile, Standard Chartered analysts predict $50-100 billion inflows into spot Bitcoin ETFs in 2024, adding that BTC’s price would rise to $200K by December 2025.
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