The first US exchange-traded funds that have direct exposure to Bitcoin, the largest cryptocurrency in the world, made their long-awaited debuts on stock exchanges.
On Thursday morning, nine new ETFs and 2 conversions from another products began trading across the New York Stock Exchange (NYSE), Nasdaq and Cboe Exchanges in hopes of attracting an influx cash from investors, just a day after receiving approval by the Securities and Exchange Commission.
The SEC had previously refused to approve the products, but after losing a court battle with Grayscale Investments last year it changed its mind. Grayscale Investments has now been approved to convert their flagship Bitcoin trust into an ETF.
CoinGecko reported that bitcoin trading volume had increased by 40 percent in the 24 hours prior to early Thursday morning. Bitcoin’s price, which is notoriously volatile, spiked early in the morning but then fell to $46,000. This was a drop of less than 1% from the previous day.
ProShares launched an ETF in early 2021 that was based on bitcoin Futures rather than spot cryptocurrency and raised $1bn from investors in just two days. This past has led to expectations of rapid growth in some of the newly-approved spot bitcoin funds.
David Mann, Franklin Templeton’s head of Product and Capital Markets, said that he expected some strong inflows from the start. Franklin Templeton is one of 11 groups that are launching an ETF for spot bitcoin.
We’ll have to wait and see if there is an initial boom, followed by a gradual climb. We are proceeding with the assumption that it will be a very fast-growing ETF, given all of the excitement surrounding this and how many investors we believe want to have exposure in an ETF format.
Grayscale had a huge head start on the day as it transferred assets worth $29bn from its bitcoin trust. Grayscale reported that the newly converted product experienced its largest-ever daily trading volumes on Thursday morning.
Grayscale’s chief executive Michael Sonnenshein said that if demand for these products is as high as we and others had predicted, then bitcoin must be purchased from the spot markets and placed into ETFs.
According to regulatory filings and spokespeople, the new ETFs have a combined seed capital of about $113mn. VanEck’s fund was the first to launch with $72.5mn, followed by Fidelity and BlackRock.
Issuers are a diverse group of asset managers, including BlackRock, Invesco, and smaller groups that focus more on digital assets such as Bitwise and Valkyrie.
In the final round of filings before launch, many issuers cut prices to compete with flows. Several waived charges for investors in the first months following the product’s launch.
Matthew Hougan, chief investment officer at Bitwise, said that he’d heard “ridiculous figures” of between $10bn and $20bn as potential flow targets for Bitcoin ETFs during their first year. However, he cautioned such expectations.
He said, “For whatever it’s value, that would have been extraordinary.” “That is not what we have seen in the ETF industry.”
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