Exchanges: Coinbase facilitates massive $7.7B Bitcoin OTC transfer amid $4.65B ETF trading premiere

Brokers: Vanguard Spurns Bitcoin ETF, Schwab Dives Right In, While Merrill Evaluates

Miners: Bitcoin Miner Outflows Hit Six-Year Highs Ahead of Halving, Sparking Mixed Signals

ETH: Buying the rumor paid off for spot bitcoin ETFs — and Ethereum looks to be next

Stablecoins: Stablecoin firm Circle confidentially files for US IPO

Launch day finally arrived for spot-backed Bitcoin ETFs on Thursday – the culmination of a decade-long saga that marks Bitcoin’s latest foray into traditional financial markets. As MRP has previously highlighted, packaging Bitcoin (BTC) into regulated securities like ETFs would make the asset class more accessible to registered investment advisors (RIAs) and institutional investors that manage many trillions of Dollars. Following the SEC’s blanket approval of 11 spot BTC funds sponsored by a list of asset managers including BlackRock, Invesco, and Fidelity, expectations were high for the first 24 hours. In the opening minutes of yesterday’s trading session, the unit price of Bitcoin spiked up to $49,000, a level untouched in over two years’ time. However, BTC retraced virtually all its initial gains throughout the day and by Friday morning had fallen back below $43,500.

Though Bitcoin remains up by roughly 2% throughout the year-to-date period in spite of the sudden fade, it appears some of the wind from the late 2023 rally has gone out of the sails. MRP projected this would be the case, noting that most of the burgeoning optimism from the ETF narrative had likely been priced in by December 20. On that date, MRP suspended our LONG Bitcoin theme, which had been in place since August 30. Throughout that period, the ProShares Bitcoin Strategy ETF (BITO) – which we used to track the performance of this theme – returned 53%, vastly outperforming a 4% gain in the S&P 500 over the same span of time. MRP’s list of Active Themes is available to All-Access clients.

The slide in BTC prices coincided with a reflective decline in the share prices of the new ETFs, but it should be noted that overall trading volume in these funds was momentous. The Wall Street Journal notes that more than $4.6 billion of shares across the spot BTC ETF landscape changed hands Thursday. This massive wave of activity in spot BTC funds was especially impressive, considering a number of large brokerages, including Vanguard and Merrill Lynch restricted client purchases of the Bitcoin ETFs. To put it in context,  opening day volume for the SPDR Gold Trust (GLD) back in 2004 was equivalent to $1.63 billion. Moreover, the volume of every single spot BTC fund easily surpassed the recent debut of futures-based Ethereum (ETH) funds that launched back in October. Day 1 trading volume in the ProShares Ether Strategy ETF (EETH) and VanEck’s Ethereum Strategy ETF (EFUT) was worth just $900,000 and $400,000, respectively.

With $2.3 billion exchanging hands, the Grayscale Bitcoin Trust (GBTC) saw the largest-ever first-day turnover for an ETF. It’s worth noting, however, that much of this volume was related to outflows from the fund by arbitrageurs who sought to capitalize on the fund’s long-standing discount to NAV (which will now be closed as a result of the ETF conversion), as well as those seeking to rotate into a fund with much lower fees. As MRP highlighted earlier this week, the fee associated with GBTC was reduced from 2.0% to 1.5%, but this was multiple times greater than fees on many of the competing funds, which could be as low as 0.2% – excluding promotional rates. The AUM of GBTC is currently near $28.6 billion and the trust holds over 619,000 BTC. Grayscale likely assumes they will be able to hang onto a large chunk of their current business and does not need to enter a race with its competitors to attract a massive slate of new customers with low fees.

The least traded among all of the new funds was the Wisdomtree Bitcoin Trust (BTCW), which did $6.6 million. But, as Bloomberg Intelligence’s Eric Balchunas notes, “that alone would be a banner first day for a new ETF, more volume than 95% of the 500 new products launched over past yr.” Balchunas also notes that much of the currently available flow data is incomplete, and will not be available until tonight or, in some cases, not until next week.

For Coinbase, the custodian of choice for nine spot BTC funds, big volume meant heavy over-the-counter activity. CryptoQuant data indicates the exchange undertook $7.7 billion in crypto transfers yesterday, equivalent to approximately 177,000 BTC. Unlike the futures-based Bitcoin ETFs that have been available in the US for some time, spot funds require the asset managers sponsoring the ETFs to acquire and custody a certain amount of Bitcoin to back the shares issued. Though the launch of the these spot-backed Bitcoin ETFs has not translated into immediate price gains, it cannot be overstated that this was a transformational moment for cryptocurrency markets. Several of the largest asset managers in the world now own tens or hundreds of millions of Dollars in Bitcoin – a prospect that was completely uncertain just a year ago. Behind Grayscale, asset managers now holding the largest amount of Bitcoin in their funds’ AUM are Fidelity, Bitwise, and Blackrock at $247.4 million, $240.4 million, and $122.3 million, respectively.

January 9, 2024: Bitcoin ETF Decision on Deck as Optimism Builds, Level of Inflows Could Steer Crypto’s Course Ahead →

December 4, 2023: Gold and Bitcoin Break Out, Greenback Stagnant on Rising Expectations for Earlier Rate Cuts →

October 24, 2023: BlackRock Reaches Breakthrough Milestones in Bid to Launch Spot-Backed Bitcoin ETF →

October 16, 2023: Bitcoin Now Worth More Than Half of Crypto Market Cap, ETF Prospects Keep Majority of Supply Unspent →

August 30, 2023: SEC Suffers Another Digital Asset Defeat in Court, Paving the Way for Reconsideration of Bitcoin ETF Applications →

August 21, 2023: SEC Tries to Slam the Door on Spot BTC Funds Until 2024, Grayscale Suit Set to Conclude in Coming Days →

July 18, 2023: Crypto Tokens Climb as SEC’s Crackdown May be Stunted by Dismissals in XRP Case →

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