With three full days of trading in the books as of the close of business on Tuesday, net inflows into the newly approved spot bitcoin exchange-traded funds appear to be about 21,000 bitcoin (BTC), or $894 million at the current price of $42,600.
Of the new money, BlackRock’s iShares Bitcoin Trust (IBIT) leads the way by adding 16,362 bitcoin, followed by Fidelity’s Wise Origin Bitcoin Fund (FBTC) with 12,112 bitcoin. Sizable exits from Grayscale’s Bitcoin Trust (GBTC), which has lost about 25,000 bitcoin, brought down the overall industry inflow.
Until the U.S. Securities and Exchange Commission blessed bitcoin ETFs last week, GBTC had existed as a closed-end fund. It was converted into an ETF as the other new products from the likes of BlackRock debuted last week. GBTC had charged customers a 2% management fee and held about 630,000 bitcoin prior to the spot ETF approvals.
While the ETF version of GBTC charges a reduced management fee of 1.5%, that is still at least 100 basis points more than its new competitors. In addition, its conversion to an ETF meant the fund no longer traded at a discount to net asset value (NAV). Combined, these two factors have given GBTC holders good reason to sell and the early returns suggest that’s occurring.
Nonetheless, the new money coming into the ETFs overshadowed that, leading to the net inflows into ETFs overall.
Price action has been far quieter this week, with bitcoin mostly settling into the $42,000-$43,000 range. At press time, it’s lower by just over 1% over the past 24 hours, slightly underperforming the 0.6% drop in the CoinDesk 20 Index, which tracks the world’s largest and most liquid cryptocurrencies.
The debate has now shifted to whether the bitcoin ETF launch was a success or a bust. For the ETF world in general, the new products have been a rousing success, argued Bloomberg’s Eric Balchunas, noting $10 billion in trading volume for the new funds in their first three days. He said there were 500 ETF launches in 2023 and, combined, they did just $450 million in volume during the whole year.
The bust crowd points to the lame price action since launch (bitcoin is lower by nearly 10%), the sizable proportion of selling action seen from GBTC and early net inflows that, while sizable, have fallen short of some bullish forecasts in the billions.
“Markets make opinions,” said Richard Russell, the late editor of “Dow Theory Letters.” If prices remain flat to lower for much longer, the “bust” contingent will likely claim victory, but if bitcoin goes on to take out $50,000 this year and perhaps challenge its all-time high above $65,000, the ETFs will surely be thought of as a major success.
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