Key points:

  • The SEC has approved 11 spot Bitcoin ETFs, a major development for the cryptocurrency industry.
  • On the first day of trading, spot Bitcoin ETF trading volume was $4.6 billion.
  • However, some analysts have expressed concerns that spot Bitcoin ETFs could lead to increased volatility in the cryptocurrency market.

US-listed Bitcoin exchange-traded funds (ETFs) witnessed $4.6 billion in share trading by Thursday afternoon, as reported by LSEG data. This surge in activity followed the Wednesday approval of these novel investment vehicles by US regulators, marking a potential turning point in the sector’s journey toward broader acceptance.

Eleven spot Bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust and Grayscale Bitcoin Trust, along with ARK 21Shares Bitcoin ETF, commenced trading on Thursday morning, igniting fierce competition for market share within the nascent space. LSEG data indicates that Grayscale, BlackRock, and Fidelity emerged as the initial trading volume leaders.

Despite this enthusiastic response, some industry executives remain cautious, highlighting Bitcoin’s inherent risk profile.

This SEC approval, a reversal from prior rejections due to investor protection concerns, has demonstrably boosted Bitcoin’s price. At market close, Bitcoin stood at $46,303, representing a 0.77% increase. The second-largest cryptocurrency, Ether, also enjoyed a boost, climbing 2.79% to $2,597.95.

Hopes and concerns for ETFs

The green light granted by regulators has ignited a fierce battle for market share among issuers. Eager to gain an edge, some have dramatically undercut the traditional fee structure of the U.S. ETF industry, offering deeply discounted or even waived fees on their Bitcoin products even before launch.

New Bitcoin ETF fees range from a low of 0.2% to a maximum of 1.5%. Moreover, several firms have implemented promotional fee waivers for specified periods. Valkyrie, for instance, reduced its fee twice, ultimately reaching a competitive 0.25% with a three-month fee waiver for early adopters.

Thursday witnessed a landmark event with the approval of Grayscale’s existing Bitcoin trust conversion into an ETF. This swift transformation resulted in the creation of the world’s largest Bitcoin ETF, boasting over $28 billion in assets under management.

Projections for the performance of spot Bitcoin ETFs diverge significantly. Bernstein analysts anticipate a gradual rise in inflows, exceeding $10 billion by 2024. Standard Chartered, on the other hand, predicts a more immediate impact, with potential inflows reaching between $50 and $100 billion this year alone. Other analysts offer intermediate estimates, suggesting inflows could reach $55 billion over a five-year period.

Despite the optimism, some analysts caution against premature exuberance. The broader investment community remains wary of the inherent risks associated with cryptocurrencies. The recent collapse of FTX, a major cryptocurrency exchange in 2022, serves as a stark reminder of these risks and further fuels investor apprehension.