The long-awaited debut of the first bitcoin spot trading funds in the United States is widely viewed as a major boost for the cryptocurrency space overall. However, this does not mean that ETFs will benefit everyone – as existing Bitcoin-related products could see their market share shrink, according to analysts.
The US Securities and Exchange Commission on Wednesday gave the green light for the first time to 11 exchange-traded funds that invest directly in Bitcoin (BTCUSD).
Funds that received full approval include: Grayscale Bitcoin Trust
,
Bitwise Bitcoin ETF BITB, Hashdex Bitcoin ETF DEFI,
Blackrock's iShares Bitcoin Trust IBIT, Valkyrie Bitcoin Fund BRRR, ARK 21Shares Bitcoin ETF ARKB, Invesco Galaxy Bitcoin ETF BTCO, VanEck Bitcoin Trust HODL, WisdomTree Bitcoin Fund BTCW, Fidelity Wise Origin Bitcoin Fund FBTC and Franklin Bitcoin ETF EZBC.
is reading: Bitcoin ETFs Finally Approved After a Chaotic, 'Embarrassing' 24 Hours to the SEC
ETFs have already seen a total of $2.3 billion in trading volume in the first few hours of trading, according to Eric Balchunas, senior ETF analyst at Bloomberg.
The arrival of spot bitcoin ETFs “will make the pie bigger” by opening up more capital to flow into the cryptocurrency space, said Yuwei Yang, chief economist at BIT Mining.
Bitcoin ETF issuers will likely go to great lengths to advertise their products, according to Greg Baird, CEO of Stronghold Digital Mining SDIG.
Such efforts could increase investor awareness of Bitcoin as it is “verified by some of the most trusted names in finance, such as Blackrock BLK,
“And sincerity,” Byrd said.
However, on the flip side, Bitcoin futures ETFs may see their market share shrink as new competition arrives, according to Mark Connors, research director at 3iQ.
The SEC first approved a bitcoin futures ETF in late 2021, and for years has rejected all applications for ETFs that invest directly in bitcoin. The agency said that bitcoin spot markets cannot be adequately monitored to prevent fraud and manipulation, while bitcoin futures markets are supervised by registered futures exchanges with sophisticated monitoring capabilities.
See also: Bitcoin in the Spotlight With SEC Approval of New ETFs and Ether Rising Here's why.
The situation began to change last August, when a federal judge ruled that the SEC's reasons for denying Grayscale Investments' application to list a bitcoin exchange-traded fund were “arbitrary and capricious” and violated federal administrative law.
Now that spot Bitcoin ETFs are on the market, some traders may still choose Bitcoin futures ETFs because they may be more liquid or can be used for arbitrage. “But as far as a Bitcoin proxy goes, I don’t see the benefit of it,” Connors said.
Investors have been concerned about the so-called “contango” dynamic of Bitcoin futures ETFs, where the funds will suffer a loss when their futures contracts are renewed if the price of the longer futures contract is higher than the expiring price on the renewal date.
ProShares Bitcoin ETF BITO Strategy,
Bitcoin futures, which is based on bitcoin futures, rose 0.2% to $22.40 on Thursday, according to FactSet data, while the VanEck Bitcoin Strategy ETF XBTF rose 0.9% to $41.70.
Meanwhile, Bitcoin-related stocks, such as cryptocurrency miners and MicroStrategy MSTR,
It may also experience short-term outflows as investors seeking exposure to Bitcoin turn their attention to Bitcoin ETFs. But Connors pointed out that these stocks can still benefit in the long term because they offer different benefits to investors.
Bitcoin mining stocks can be viewed as leveraged bitcoin holders, according to Stronghold's Beard, because they tend to have a higher spread when the price of bitcoin rises.
Shares of cryptocurrency mining company Riot Platforms RIOT,
The stock price fell 15.2% to $13.19 on Thursday, according to Dow Jones market data. marathon Digital Holdings Mara,
Shares lost 14.1% to $22.02, Ebang International Holdings lost EBON,
The stock fell 8.3% to $11.17.
is reading: Don't assume Coinbase shares will benefit from a Bitcoin ETF, analysts say
For spot bitcoin ETFs that began trading Thursday, it may take some time to figure out which product will win more market share, noted Rick Edelman, founder of the Digital Assets Council for Financial Professionals. He said that each Bitcoin ETF has different benefits, and investors will likely end up choosing the product that suits them best.
Funds managed by traditional Wall Street firms may be able to attract significant interest early on, as “most financial advisors tend to choose companies they already know and work with, rather than trying to find someone new they don’t know.” “, according to Edelman.
However, local cryptocurrency companies like BitWise may attract interest from those who prefer to work with companies with deep experience in the digital assets industry, he added.
BlackRock's iShares Bitcoin Trust fell 4.2% to $26.78 on Thursday. The Fidelity Wise Origin Bitcoin Fund fell 2.5% to $40.93, while the Bitwise Bitcoin ETF rose 2.8% to $25.69.
