US Bitcoin ETFs Record $4.6 Billion in Trading Volume on First Day, Led by Grayscale and BlackRock

Grayscale, BlackRock, and Fidelity spearheaded trading volumes as revealed by LSEG data.

On Thursday afternoon, United States-listed bitcoin exchange-traded funds (ETFs) experienced a trading volume of $4.6 billion in shares, based on LSEG data. This surge in interest followed the US securities regulator’s approval of these groundbreaking products on Wednesday.

This milestone for the cryptocurrency industry will determine if digital assets, often perceived as risky by professionals, can achieve wider recognition as investments.

Eleven spot bitcoin ETFs – featuring BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, among others – commenced trading on Thursday morning, initiating a heated battle for market share.

LSEG data indicated that Grayscale, BlackRock and Fidelity led the trading volumes.

“Trading volumes have been quite robust for new ETF products,” remarked Todd Rosenbluth, a strategist at VettaFi. “However, this is more than just a single day’s trading event.”

The US Securities and Exchange Commission granted approval for these products late on Wednesday after a ten-year struggle with the crypto sector.

Some executives labeled bitcoin as a high-risk investment, while Vanguard – the largest provider of mutual funds – stated it had no intention of offering the new set of spot bitcoin ETFs to its brokerage clients via its platform.

Previously, the SEC had rejected all spot bitcoin ETFs due to concerns about investor protection. On Wednesday, SEC Chair Gary Gensler declared in a statement that these approvals should not be considered endorsements of bitcoin since it is a “speculative, volatile asset.”

The launch of these ETFs boosted bitcoin’s price to its highest level since December 2021. It later increased by 0.77 percent to $46,303, while ether, the second-largest cryptocurrency, rose by 2.79 percent to $2597.95.

Battle for market share

Approval from regulators triggered fierce rivalry among issuers for market share. In an attempt to gain an advantage, some reduced their product fees well below the standard US ETF industry fees even before the launch on Thursday.

The new bitcoin ETFs have fees ranging from 0.2 percent to 1.5 percent. Several companies have also offered temporary fee waivers or waived fees for a specific dollar amount of assets. Following the commencement of trading for its ETF, Valkyrie reduced its fees to 0.25 percent for the second time and waived them for the initial three months.

Grayscale was granted permission to transform its existing bitcoin trust into an ETF on Thursday, instantaneously creating the largest bitcoin ETF globally with over $28 billion in assets under management.

Projections for the potential inflows of bitcoin spot ETFs differ significantly. Bernstein analysts predict that inflows will gradually accumulate, surpassing $10 billion in 2024. Meanwhile, Standard Chartered analysts anticipate that ETFs could attract $50 billion to $100 billion just this year. Other experts suggest that inflows may reach $55 billion over five years.

As ETF trading commenced on Thursday, market participants closely monitored bid-ask spreads – the gap between an ETF’s purchasing and selling prices. ETFs with tighter spreads are typically more appealing.

Factors such as trading volume, operational mechanisms, and the number of participants involved “are crucial in driving spreads to an optimal level,” said Jason Stoneberg, Invesco’s director of product strategy. Invesco introduced its ETF in collaboration with Galaxy Digital on Thursday.

However, some analysts warn that the excitement surrounding the approval might be hasty. The broader investment community still perceives cryptocurrencies as hazardous due to events like the collapse of crypto exchange FTX in 2022 intensifying investor caution.

A Vanguard representative stated that the company has no intention of launching its crypto investment products and will maintain its focus on core asset classes like stocks, bonds, and cash – considered essential components for a well-balanced, long-term investment portfolio.

Sharmin Mossavar-Rahmani, head of the Investment Strategy Group and CIO of Wealth Management at Goldman Sachs, claimed in a Thursday webinar that cryptocurrencies have no place in an investment portfolio.

She questioned bitcoin’s value, saying: “We don’t think it is an asset class to invest in.”

Crypto stocks gain

However, some believe these products will lay the groundwork for even more inventive crypto ETFs, such as spot ether products.

Grayscale CEO Michael Sonnenshein announced in an interview on Thursday plans to file for a covered call ETF to enable investors to generate income from options on its spot bitcoin product.

Despite starting off strong on Thursday, cryptocurrency-related stocks ended the day lower. Bitcoin miners Riot Platforms and Marathon Digital fell 15.8% and 12.6%, respectively. Bitcoin investor Microstrategy dropped 5.2%, and crypto exchange Coinbase declined 6.7%. The ProShares Bitcoin Strategy ETF, following bitcoin futures, gained 0.44%.

In addition, Circle Internet Financial, the company responsible for stablecoin USDC’s issuance and governance, revealed that it had confidentially filed for an initial public offering in the United States. USDC is a cryptocurrency pegged to the US dollar.