Bitcoin trading volumes surge after debut of long-awaited US ETFs

Bitcoin trading volumes surged on Thursday after the first 10 US exchange traded funds offering direct exposure to the world’s largest cryptocurrency made a long-awaited debut on stock exchanges.

Trading in the nine new ETFs and Grayscale Investments’ converted $28bn bitcoin trust exceeded $4bn across the New York Stock Exchange, Nasdaq and Cboe exchanges, a day after they received approvals from the Securities and Exchange Commission.

Hashdex, a Brazilian fund manager, had aimed to convert an existing futures product into a spot bitcoin ETF but was unable to do so on Thursday as the SEC continued to review the paperwork for its conversion.

Grayscale’s bitcoin ETF accounted for about half of the action, according to Bloomberg Intelligence and the company, which said $1bn in trading occurred within 90 minutes of markets opening.

BlackRock said its iShares bitcoin ETF experienced more than $1bn in trading by the end of the day as the historically volatile bitcoin price jumped early on before pulling back to about $46,000, down slightly from Wednesday’s level.

The bitcoin price has risen about 50 per cent over the past six months as consensus built around the increased likelihood of the SEC approving spot ETFs, which make it easier for everyday investors to gain exposure to the best-known cryptocurrency.

The regulator had previously refused to greenlight the products but changed course last year after losing a legal battle with Grayscale. Like mutual funds, ETFs hold assets — just bitcoin, in this case — but they trade on exchanges like stocks and usually enjoy preferential tax treatment in the US.

The $4bn in trading did not reflect an influx of new money at that scale. Some of the trading was likely to have been rotational as investors sold out of Grayscale’s flagship bitcoin trust, which charges a 1.5 per cent fee, well above its competitors, said Todd Rosenbluth, head of research at VettaFi, a consultancy. It could also include investors selling bitcoin they had bought in anticipation of the ETFs launching, he said.

An earlier ETF based on bitcoin futures, rather than the spot cryptocurrency, pulled in $1bn in investor money in the first two days of its launch in late 2021 by ProShares. This helped fuel expectations that the newly approved spot bitcoin funds would have rapid growth.

“I think there’s actually going to be some pretty strong inflows out of the gate,” said David Mann, head of ETF product and capital markets for Franklin Templeton, which is among the groups launching spot bitcoin ETFs.

“Whether there’s an initial pop and then a slow climb thereafter, I guess we’ll see. But . . . given what we think is a sizeable amount of investors who want this particular exposure with an ETF form, we are certainly proceeding as if it’s going to be gathering assets quickly.”

The new ETFs began with about $113mn combined in seed capital, according to spokespeople and regulatory disclosures. The fund launched by VanEck led the way with about $72.5mn in starting money, followed by Fidelity with $20mn and BlackRock with $10mn.

The issuers constitute a broad spectrum of the ETF industry, with large and diversified asset managers including BlackRock and Invesco offering products alongside smaller groups with a stronger focus on digital assets, such as Valkyrie and Bitwise.

The first day of trading went “relatively smoothly”, said Matthew Sigel, VanEck’s head of digital assets research.

“The bitcoin blockchain is not terribly congested right now,” he said shortly before US markets closed on Thursday.

In a final round of pre-launch filings, most issuers slashed prices in an attempt to compete for flows, with several waiving charges to investors for the initial months after the products are launched.

Bitwise chief investment officer Matthew Hougan said he had heard some “ridiculous numbers” in the range of $10bn to $20bn mentioned as possible flow targets for bitcoin ETFs in their first year but cautioned against such hopes.

“That would be extraordinary,” he said. “That’s not what the ETF industry has seen.”

Even as they were able to offer direct exposure to bitcoin for the first time, some groups were pushing forward with other new products.

Grayscale on Thursday filed to launch another ETF that would sell options on its bitcoin trust — the latest addition to the covered call ETF industry, which has surged in popularity in recent years.

This story has been updated to clarify that only 10 funds launched on Thursday, after Hashdex was unable to convert its product as planned.