According to LSEG data, $4.6 billion worth of shares of US-listed bitcoin exchange-traded funds (ETFs) changed hands as investors flocked to the historic products that the US securities regulator had approved on Wednesday.
The products mark a turning point for the cryptocurrency industry because they will determine whether or not digital assets, which many professionals still view as dangerous, can become a respectable form of investment.
Eleven spot bitcoin exchange-traded funds (ETFs), such as ARK 21Shares Bitcoin ETF, Grayscale Bitcoin Trust, and BlackRock’s iShares Bitcoin Trust, started trading on Thursday morning, sparking a competitive race for market control.
According to the LSEG data, Grayscale, BlackRock, and Fidelity dominated trading volumes.
After a ten-year battle with the cryptocurrency industry, the US Securities and Exchange Commission ultimately approved the products on Wednesday.
The biggest mutual fund provider, Vanguard, stated that it has no intentions to offer its brokerage clients access to the new batch of spot bitcoin ETFs on its platform after some executives criticized bitcoin as a high-risk investment.
SEC Chair Gary Gensler described bitcoin as a “speculative, volatile asset” in a statement on Wednesday, stating that the approvals did not represent an endorsement of the cryptocurrency.
With the introduction of the ETF, the price of bitcoin reached its highest point since December 2021. The price of ether, the second-largest cryptocurrency, was up 2.79 percent at $2597.95, while its price was up 0.77 percent at $46,303.
Competition for market share
The regulatory approval spurred fierce competition among the issuers for market share; even prior to Thursday’s launch, some of them drastically reduced the rates for their products.
The new bitcoin ETFs have costs ranging from 0.2 percent to 1.5 percent, and several companies are even willing to eliminate fees completely for a specific amount of time or for a specific dollar volume of assets. Valkyrie reduced its fees to 0.25 percent once the ETF began trading, and it waived them for the first three months.
With its historic trust-to-ETF conversion, Grayscale’s $28 billion behemoth signals a new era for bitcoin accessibility.
There are differing opinions about how much spot bitcoin ETFs could earn. Bitcoin ETF inflows could be a bonanza, with predictions ranging from Standard Chartered’s $50 billion-$100 billion this year to Bernstein’s more cautious $10 billion in 2024. A five-year haul of $55 billion is also on the table.
It indicates that there are more buyers and sellers in the market, which can help to stabilize the price of the ETF.
“Optimizing spreads is key,” says Stoneberg, emphasizing their importance alongside volume, infrastructure, and market participation.
The general investing public still perceives cryptocurrencies as dangerous, and events like the collapse of the cryptocurrency exchange FTX in 2022 have only served to heighten investor apprehension.
According to a Vanguard representative, the company has no plans to introduce its own cryptocurrency investment products and will continue to concentrate on traditional asset classes like cash, bonds, and equities because it sees these as “the building blocks of a well-balanced, long-term investment portfolio.”
Sharmin Mossavar-Rahmani, a heavyweight at Goldman Sachs, throws cold water on cryptocurrencies’ investment potential.
Cryptocurrency Stocks Rise
Yet, some believe the products may open the door for even more cutting-edge cryptocurrency exchange-traded funds, such as spot ether offerings.
In an interview on Thursday, Grayscale CEO Michael Sonnenshein stated that the company intends to apply for a covered call exchange-traded fund (ETF) in an attempt to enable investors to profit from options on its spot bitcoin product.
On Thursday, companies involved in cryptocurrencies saw gains at first, but then losses for the day, with bitcoin miners Riot Platforms and Marathon Digital falling 15.8 percent and 12.6 percent, respectively.
Microstrategy, a bitcoin investor, dropped 5.2%, while Coinbase, a cryptocurrency exchange, plummeted 6.7%. Tracking bitcoin futures, the ProShares Bitcoin Strategy ETF saw a 0.44 percent increase.
The business that created the stablecoin USDC, Circle Internet Financial, also announced on Thursday that it had quietly submitted an application for a US initial public offering. Circle is the company that issues and manages the US dollar-denominated cryptocurrency USDC.