Thursday marked the debut of Bitcoin exchange-traded funds (ETFs), and the market saw significant swings, reflecting the broader volatility in cryptocurrency prices.
During midday trading, the Grayscale Bitcoin Trust (GBTC) experienced a 1.3% increase, while the iShares Bitcoin Trust (IBIT) initially rose but later fell by more than 4%. Both funds witnessed substantial trading volumes within the first 10 minutes of the trading session.
These ETFs are among the first of potentially 11 funds expected to start trading on Thursday. The Grayscale fund, with over $28 billion in assets, is the largest among them, having been converted from an over-the-counter trust. The Hashdex fund, a strategy change from an existing bitcoin futures ETF, was still pending SEC approval as of Thursday morning.
The ETF movements coincided with Bitcoin’s own volatile day. The digital currency briefly surged past $49,000 before retracting below $47,000, registering a gain of less than 1%, according to Coin Metrics. Given that Bitcoin trades around the clock, the timing of the ETF launches could have influenced their first-day performances.
ETFs are popular investment vehicles where investors purchase shares representing a claim on the fund’s underlying assets. While equity index funds are the most well-known, ETFs also track bonds, derivatives, and commodities like gold.
Financial advisors and institutional investors often favor ETFs due to their liquidity and tax advantages compared to mutual funds. Asset managers anticipate that Bitcoin ETFs will attract new investors to the crypto market.
Jonathan Steinberg, CEO of WisdomTree, believes that ETFs simplify complex investments, making them more accessible and compliant for mainstream investors. He stated on CNBC’s “Money Movers,” “This will allow a less technology-sophisticated investor to buy bitcoin in a way that they are very comfortable with.”
Investors and advisors are closely monitoring the performance of Bitcoin ETFs and their ability to track Bitcoin’s price accurately. Significant gaps between a fund’s price and Bitcoin’s actual value over multiple days could indicate trading issues or structural problems, potentially deterring buyers despite short-term outperformance.
Trading volume is another crucial metric, with higher volumes indicating greater efficiency for the funds.
The success of these ETFs could also hinge on their pricing strategies. Several issuers slashed their fees just before launch, and some are offering temporary fee waivers, reducing their management fees to 0% initially. These pricing decisions could impact investor interest and the funds’ long-term performance.
(Source: CNBC | CoinDesk | WSJ)
