US Bitcoin ETFs garnered $4.6 billion in trading volume after landmark SEC approval, competition for market share fierce

The United States-listed bitcoin exchange-traded funds (ETFs) saw substantial trading activity, with $4.6 billion worth of shares changing hands by Thursday afternoon, according to LSEG data. This followed the landmark approval by the US securities regulator on January 10, marking a significant moment for the cryptocurrency industry, testing the acceptance of digital assets as investments.

Eleven spot bitcoin ETFs, including BlackRock's iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, commenced trading on January 11 morning, leading to a competitive battle for market share, Reuters reported. Notably, Grayscale, BlackRock, and Fidelity dominated trading volumes, as indicated by LSEG data.

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Caution Amid Strong Initial Trading Volumes

"Trading volumes have been relatively strong for new ETF products," Todd Rosenbluth, strategist at VettaFi told the publication. However, he emphasised that this is a longer-term race beyond a single day's trading.

The US Securities and Exchange Commission's (SEC) approval on January 10 came after a decade-long struggle with the crypto industry. Despite the green light, some executives warned of bitcoin's high-risk nature, and Vanguard, the largest mutual fund provider, stated it had no plans to offer the new spot bitcoin ETFs on its platform.

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SEC Chair Gary Gensler clarified that the approvals were not an endorsement of Bitcoin, describing it as a "speculative, volatile asset."

Market Impact and Fee Competition

The ETF launches led to a surge in bitcoin prices, reaching the highest level since December 2021. Bitcoin was last up 0.77 percent at $46,303, while the second-largest cryptocurrency, ether, rose 2.79 percent to $2597.95.

Intense competition ensued among issuers, with some slashing fees below the industry standard. Fees on the new bitcoin ETFs range from 0.2-1.5 percent, and several firms offered to waive fees for a specific period or dollar volume of assets.

Estimates for the potential inflow into spot bitcoin ETFs vary widely, with analysts projecting flows to surpass $10 billion in 2024 or potentially reaching $50 billion to $100 billion in 2023 alone, as per the report. However, some cautionary notes highlight the broader investment community's perception of cryptocurrencies as risky.

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Cryptocurrency-related stocks initially climbed but ended lower, with Riot Platforms and Marathon Digital dropping 15.8 percent and 12.6 percent, respectively. Bitcoin investor Microstrategy fell 5.2 percent, while Coinbase declined by 6.7 percent, the report said. In contrast, the ProShares Bitcoin Strategy ETF, tracking bitcoin futures, gained 0.44 percent, it added.

Despite scepticism, some anticipate the ETFs paving the way for more innovative crypto products, including spot ether ETFs. Grayscale CEO Michael Sonnenshein expressed plans to file for a covered call ETF, allowing investors to generate income from options on its spot bitcoin product.