Bitcoin ETFs go viral, US investors trade about $4.6bn worth of cryptos on first day of trading

US-listed bitcoin exchange-traded funds (ETFs) witnessed a remarkable debut with approximately $4.6 billion worth of shares traded on the first day of trading, as reported by LSEG data.

Eleven spot bitcoin ETFs, including offerings from major players like BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, began trading, marking a significant moment for the cryptocurrency industry.

Grayscale, BlackRock, and Fidelity dominated trading volumes on the launch day, according to data from the London Stock Exchange Group (LSEG). The green light from the US Securities and Exchange Commission (SEC) for these products came on Wednesday, following years of regulatory deliberation.

While the new ETFs enjoyed strong initial trading, industry experts caution that the competition for market share is a longer-term race. The SEC’s approval of these ETFs has triggered intense competition among issuers, leading some to slash fees below the industry standard.

SEC Chair Gary Gensler emphasized that the approval did not constitute an endorsement of Bitcoin, referring to it as a “speculative, volatile asset.” Nevertheless, the ETF launches coincided with a surge in bitcoin prices, reaching its highest level since December 2021.

The regulatory approval has sparked a race for market share among issuers, with some reducing fees significantly below industry standards even before the launch. The fees for the new bitcoin ETFs range from 0.2 per cent to 1.5 per cent, with issuers offering fee waivers for a specified period or asset volume.

Analysts have varying estimates for the potential inflows into spot bitcoin ETFs, with Bernstein suggesting gradual growth to surpass $10 billion in 2024, while Standard Chartered analysts believe these ETFs could attract $50 billion to $100 billion in 2023 alone.

While the ETFs began trading with enthusiasm, some analysts caution that the broader investment community still perceives cryptocurrencies as risky. The overall sentiment remains cautious, with institutions like Vanguard stating they have no plans to offer these products to their brokerage clients.

Despite the euphoria surrounding the ETF approval, there is ongoing scepticism about the role of cryptocurrencies in traditional investment portfolios. Goldman Sachs, for example, expressed a view that cryptocurrencies like Bitcoin have no place in an investment portfolio.

(With inputs from agencies)