July 21, 2024

Bitcoin volumes surge as long-awaited ETFs debut

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

Nine new ETFs and two conversions from other products started trading on Thursday morning across the New York Stock Exchange, Nasdaq and Cboe exchanges with hopes of scoring an influx of investor cash, a day after they received approvals from the Securities and Exchange Commission.

The SEC previously had refused to greenlight the products but changed course last year after losing a legal battle to Grayscale Investments, which has now received approval to convert its flagship bitcoin trust into an ETF.

Early on Thursday, bitcoin trading volumes had risen about 40 per cent in the previous 24 hours, according to CoinGecko. The price of bitcoin, historically volatile, jumped early in the day but later pulled back to about $46,000, up less than 1 per cent from the day before.

An earlier ETF based on bitcoin futures, rather than the spot cryptocurrency, garnered $1bn in investor money in the first two days of its launch in late 2021 by ProShares. This history has raised expectations for rapid growth for some of the newly approved spot bitcoin funds.

“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 11 groups launching a spot bitcoin ETF.

“Whether there’s an initial pop and then a slow climb thereafter, I guess we’ll see. But given the excitement and 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.”

Grayscale began the day with a massive head start as it brought over about $29bn in assets from its bitcoin trust. Grayscale said the newly converted product had experienced its highest-ever daily trading volume on Thursday morning.

“If demand is there for these products in the way that we and others have believed there will be, that means that bitcoin needs to be acquired from the spot market and put into ETFs,” Grayscale chief executive Michael Sonnenshein told the FT earlier this week.

The new ETFs had pooled 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.

In a final round of pre-launch filings, most issuers slashed prices in a bid 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.

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

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