Cryptocurrency

Bitcoin ETFs now available for trading in the US, testing investor interest in cryptocurrency.

US Bitcoin ETFs Begin Trading in the U.S. Market

Bitcoin ETFs Make Landmark Debut

Several exchange-traded funds (ETFs) tied to the spot price of bitcoin began trading in the U.S. on Thursday, marking a significant moment for the cryptocurrency industry. This move is set to test the broader acceptance of digital assets as an investment.

Regulatory Approval and Market Impact

The U.S. Securities and Exchange Commission’s green light for these ETFs came after a decade-long tussle with the crypto industry, finally granting approval late on Wednesday. Eleven spot bitcoin ETFs, including BlackRock’s iShares Trust, Grayscale Bitcoin Trust, Valkyrie Bitcoin Fund, and ARK 21Shares Bitcoin ETF, among others, commenced trading Thursday morning. This kick-started a fierce competition for market share.

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Market Response and Investor Outlook

The approval has the potential to simplify and secure bitcoin investments for a broader investor base, which may reshape the dynamics of cryptocurrency investments. The ETF launches lifted the price of bitcoin to its highest level since December 2021, with the price of ether, the second-largest cryptocurrency, also experiencing an increase. The regulatory nod is expected to intensify competition among issuers, with some lowering the fees for their products well below the U.S. ETF industry’s standard even before Thursday’s launch.

ETF Flows and Market Dynamics

Fees on the new bitcoin ETFs range from 0.2% to 1.5%, with many firms offering to waive fees entirely for a certain period of time. Analysts estimate that bitcoin ETF flows will build up gradually, crossing $10 billion in 2024 and reaching $80 billion by the end of next year. Market participants are closely watching bid-ask spreads as the ETFs began trading Thursday, with narrower spreads typically being viewed as more desirable.

Investor Cautions and Market Volatility

Some analysts caution that the euphoria around the approval might be premature. The broader investment community still views cryptocurrencies as risky, with volatility in bitcoin prices likely to persist. The SEC had earlier rejected all spot bitcoin ETFs on investor protection concerns, and SEC Chair Gary Gensler emphasized that the approvals were not an endorsement of bitcoin, calling it a “speculative, volatile asset” also used to fund crime.

Impact on Cryptocurrency-Related Stocks

Cryptocurrency-related stocks initially climbed higher on Thursday but were last lower, with bitcoin miners Riot Platforms and Marathon Digital dropping more than 12%. Bitcoin investor Microstrategy fell 4.2%, and crypto exchange Coinbase 5.4%. The ProShares Bitcoin Strategy ETF, which tracks bitcoin futures, lost 0.4%. Shares of retail trader-focused brokerage Robinhood fell 3.1%. Additionally, Circle Internet Financial, the company behind stablecoin USDC, said it had confidentially filed for a U.S. initial public offering.

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