Most people agree that the long-awaited launch of the first spot bitcoin exchange-traded funds in the United States has greatly boosted the cryptocurrency market as a whole. However, this does not guarantee that everyone will profit from the ETFs; analysts note that certain current bitcoin-related products may face a decline in market share.
On Wednesday, the U.S. Securities and Exchange Commission approved 11 ETFs that directly invest in bitcoin for the first time. The following funds have been given the all-clear: Grayscale Bitcoin Trust ARK 21Shares Bitcoin ETF ARKB, VanEck Bitcoin Trust HODL, Fidelity Wise Origin Bitcoin Fund FBTC, Valkyrie Bitcoin Fund BRRR, Bitwise Bitcoin ETF BITB, Hashdex Bitcoin ETF Blackrock’s iShares Bitcoin Trust IBIT, and Invesco Galaxy Bitcoin ETF BTCO.
In just a few hours of trading, the ETFs have already witnessed a total trading volume of $2.3 billion, according to Eric Balchunas, senior ETF analyst at Bloomberg.
Spot bitcoin ETFs will “make the cake bigger” by allowing more capital to enter the cryptocurrency market, according to Youwei Yang, BIT Mining’s senior economist.
The CEO of Stronghold Digital Mining, Greg Beard, predicts that spot bitcoin ETF issuers will work very hard to market their offerings. Given that “it is being validated by some of the most trusted names in finance, such as Blackrock and Fidelity,” Beard suggested that such initiatives would raise investor awareness of bitcoin.
On the other hand, Mark Connors, director of research at 3iQ, believes that new competitors may cause bitcoin futures ETFs’ market share to decline.
After initially approving an ETF for bitcoin futures in late 2021, the SEC denied all proposals for ETFs that made direct bitcoin investments for a few of years. The government stated that while bitcoin futures markets were supervised by registered futures exchanges with advanced surveillance capabilities, bitcoin spot markets could not be adequately monitored to prevent fraud and manipulation.
Things began to shift in August of last year when a federal judge declared that the SEC had violated federal administrative law by using “arbitrary and capricious” justifications in rejecting Grayscale Investments’ application to launch a bitcoin ETF.
Even with the availability of spot bitcoin exchange-traded funds (ETFs), some traders may still prefer bitcoin futures ETFs because they may be more liquid or allow for arbitrage opportunities. However, Connors stated that he does not see any advantages to using a bitcoin proxy.
The so-called “contango” dynamic for bitcoin futures exchange-traded funds (ETFs) has alarmed investors. If the longer futures price is higher than the expiring one on the renewal date, the funds would lose money when they renew their forward contracts.
Based on bitcoin futures, the ProShares Bitcoin Strategy ETF gained 0.2% to $22.40 on Thursday, while the VanEck Bitcoin Strategy ETF saw a 0.9% increase to $41.70, per FactSet data.
Equities linked to bitcoin, including MicroStrategy and crypto miners, can also experience brief withdrawals as investors looking to get exposure to bitcoin move their focus to bitcoin exchange-traded funds (ETFs). However, Connors pointed out that those stocks might still be advantageous in the long run because they offer a variety of benefits to investors.
According to Stronghold’s Beard, investors in bitcoin-mining stocks may be considered leveraged bitcoin holders since they often profit from increases in the price of bitcoin.
Riot Platforms’ stock dropped 15.2% to $13.19 on Thursday, as per Dow Jones Market Data. Riot Platforms is a cryptocurrency miner. The stock of Ebang International Holdings fell 8.3% to $11.17, while shares of Marathon Digital Holdings fell 14.1% to $22.02.
According to Ric Edelman, the founder of the Digital Assets Council of Financial Professionals, it might take some time to determine which of the spot bitcoin ETFs that began trading on Thursday will capture a larger market share. According to him, investors will probably choose the bitcoin ETF that best fits their needs because each one has a unique set of benefits.
According to Edelman, most financial advisers will choose the firms they already know and work with rather than attempting to find someone new that they’re not as acquainted with, so funds managed by traditional Wall Street firms may be able to attract a lot of interest early on.
According to him, individuals that favor collaborating with companies that possess extensive knowledge in the digital asset sector can show interest in crypto-native enterprises like BitWise.
Thursday saw a 4.2% decline in BlackRock’s iShares Bitcoin Trust to $26.78. Though Bitwise Bitcoin ETF increased 2.8% to $25.69, Fidelity Wise Origin Bitcoin Fund fell 2.5% to $40.93.
