U.S.-listed Bitcoin ETFs see strong trading debut, sparking crypto market competition

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U.S.-listed bitcoin exchange-traded funds (ETFs) experienced a robust start as $4.6 billion worth of shares traded hands following their approval by the U.S. securities regulator. This marked a significant milestone for the cryptocurrency industry, testing the broader acceptance of digital assets as investments.

Eleven spot bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, commenced trading, triggering intense competition among market players. Notably, Grayscale, BlackRock, and Fidelity dominated trading volumes.

Despite the initial success, some industry executives cautioned about the risks associated with bitcoin as an investment. Vanguard, the largest provider of mutual funds, announced that it had no plans to offer the new batch of spot bitcoin ETFs on its platform, citing concerns about investor protection.

SEC Chair Gary Gensler emphasized that the approval did not signify an endorsement of bitcoin, highlighting its speculative and volatile nature. Nonetheless, the ETF launches propelled bitcoin’s price to its highest level since December 2021, with other cryptocurrencies like ether also experiencing gains.

Competition among issuers led to a reduction in fees for the new bitcoin ETFs, with some firms offering fee waivers for a limited period or volume of assets. Valkyrie, for instance, slashed its fees to 0.25% and waived them for the first three months after its ETF started trading.

Grayscale’s approval to convert its existing bitcoin trust into an ETF overnight created the world’s largest bitcoin ETF, managing over $28 billion in assets. Analysts’ estimates for the inflow of funds into spot bitcoin ETFs varied widely, with some projecting flows to reach $10 billion by 2024, while others anticipated figures as high as $100 billion this year alone.

As the ETFs began trading, bid-ask spreads became a focal point for market participants, with narrower spreads indicating higher desirability. While some analysts cautioned against premature euphoria, others predicted that the products could pave the way for innovative crypto ETFs, including those for spot ether.

Despite the optimism surrounding the ETFs, the broader investment community remains cautious about cryptocurrencies, viewing them as risky assets. This sentiment was echoed by Vanguard, whose spokeswoman reiterated the firm’s focus on traditional asset classes like stocks, bonds, and cash.

In a webinar, Goldman Sachs’ Sharmin Mossavar-Rahmani expressed skepticism about cryptocurrencies’ place in investment portfolios, questioning their value. Nonetheless, some anticipate the ETFs to drive further innovation in the crypto space, potentially leading to the introduction of spot ether products.

The debut of the ETFs also had implications for cryptocurrency-related stocks, initially causing them to rise before ending the day lower. Companies like Riot Platforms, Marathon Digital, Microstrategy, and Coinbase saw fluctuations in their stock prices. Meanwhile, the ProShares Bitcoin Strategy ETF, which tracks bitcoin futures, recorded modest gains.

In a separate development, Circle Internet Financial, the company behind stablecoin USDC, announced its confidential filing for a U.S. initial public offering. USDC is a cryptocurrency pegged to the U.S. dollar, and Circle controls its issuance and governance.

The strong debut of U.S.-listed bitcoin ETFs and their potential impact on the crypto market have set the stage for further developments in the evolving landscape of digital asset investments.

(Source: Reuters | Bloomberg)

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