Total trading volume for the 11 new bitcoin ETFs in the US exceeded $10bn in their first three days, higher than the trading volume of all the ETFs launched in 2023 over the same time period.

The US Securities and Exchange Commission finally approved the listing and trading of 10 spot bitcoin ETFs on 10 January 2024, and approved the conversion of the Grayscale Bitcoin Trust into an ETF, and they all began trading the following day.

Eric Balchunas, senior ETF analyst for Bloomberg, said:

Let me put into context how insane $10b in volume is in first 3 days. There were 500 ETFs launched in 2023. Today, they did a COMBINDED $450m in volume. The best one did $45m. And many have had months to get going. $IBIT alone is seeing more activity than the entire '23 Freshman… https://t.co/wV1zQFtPW1

— Eric Balchunas (@EricBalchunas) January 16, 2024

However, Greg Cipolaro, global head of research at NYDIG, a bitcoin financial services and infrastructure firm, said in a report that trading volumes do not predict inflows into the new ETFs. For example, the iShares Bitcoin Trust traded over $1bn on the first day, but this only resulted in $112m in fund flows.

8/10 The robust trading volumes on the first two days failed to accurately predict inflows but might be more attributable to existence of arbitrage for market makers given the initially high premium to NAV (mid-single digits percent). pic.twitter.com/NwzV2DbgZa

— NYDIG (@NYDIG) January 16, 2024

One reason for the high trading volume could be the premium to net asset value (NAV) at which most funds were trading , which was at times mid to high single digits percentages according to Cipolaro.

“This incentivized abnormally high trading volume for market makers and Authorized Participants who were engaged in arbitrage activities,” he added. “While the premium to NAV eventually shrunk into the first day close, this profit opportunity could’ve motivated abnormally high trading activity compared to other ETF launches.”

The Blockworks daily newsletter said that in terms of flows, there is a tug of war between investors fleeing the relatively expensive Grayscale ETF and the new cheap ETF offerings from BlackRock, Fidelity, and others who are seeing record inflows.

James Butterfill, research head at Coinshares, the digital asset fund manager, said:

Net outflows this week so far of US$424m as investors switch to cheaper US Funds. GBTC seen US$1.18bn outflows since spot-based ETF launch & BITO US$141m outflows this week. Newly issued US spot bitcoin ETFs have now seen US$2bn inflows. Data as of close 16th Jan 2024. pic.twitter.com/BBhyZI2A5c

— James Butterfill (@jbutterfill) January 17, 2024

Low fees

Cipolaro highlighted that the low ETF mean that fees annual revenue for all sponsors, excluding Grayscale, amount to only $1. Crypto asset manager Grayscale Investments launched the Grayscale Bitcoin Trust trust  the first publicly-traded bitcoin fund in the U.S in 2013 converted into an ETF when the SEC authorised 10 other new bitcoin ETFs.

“We would guess 5 – 10 basis points of assets under management goes to the custodians (mostly Coinbase) and other service providers,” added Cipolaro. “This analysis doesn’t even include the initial setup costs and legal fees associated with just getting these funds to the starting line.”

5/10 The Grayscale (GBTC) and the ProShares (BITO) ETFs have fared surprisingly well so far, ceding little share, despite high fees and/or structural disadvantage. pic.twitter.com/RrVqdkjufw

— NYDIG (@NYDIG) January 16, 2024

However, Cipolaro also said the bitcoin ETFs have so far been an unequivocal success.

“The ETFs raised hundreds of millions of new investment into bitcoin, given investors access to the asset class in a familiar way, given investors protections afforded by our nation’s securities and exchange laws, reduced fees, and reduced portfolio issues with existing exchange and broker dealer traded alternatives, including tracking error, discounts/premiums to NAV, and roll costs (all associated with owning derivatives based ETFs or closed-end funds),” he added.

Future scenarios

The reaction from the markets following the SEC’s  ETF approval suggests that conversations have already opened about the possibility of an Ethereum ETF, with seven applicants already in the race for approval according to A report from CCData, an FCA-authorised benchmark administrator and  digital asset data provider.

“The second largest crypto asset by market capitalization was one of the better performers since the ETF approval announcement with the ETH/BTC ratio looking set to reverse the downtrend of the past few months,” CCData said.

CCData noted that Canada’s six spot bitcoin ETFs have gathered $2.3bn in assets under management and so it is plausible to project an influx of approximately 500,000 BTC into U.S. ETFs, currently valued at $22bn.

“This comparison not only underscores the robust potential for asset growth but also resonates with institutional investors seeking a diversified store of value that aligns with the digital age’s ethos,” CCData added.

Day 4 data in the books https://t.co/KyVqoPsgMI

— James Seyffart (@JSeyff) January 18, 2024