- January 21, 2024
- Posted by: [email protected]
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Last Thursday’s introduction of U.S. Bitcoin (BTC) spot ETFs represented a significant milestone, propelling the digital currency to the second-largest commodity in the US ETF market. According to VettaFi, the total managed assets behind the securities wrapper have risen to $26 billion, exceeding silver ETFs, which presently contain little more than $11 billion.
Bloomberg ETF analyst Eric Balchunas provided insights into the rapid growth of Bitcoin ETFs, revealing that net flows to these funds increased by $1 billion within the first five days of trading. Notably, the substantial majority of Bitcoin holdings within these ETFs are not associated with newly launched funds. Instead, the Grayscale Bitcoin Trust (GBTC), having operated as an investment trust since 2013, holds $23.1 billion worth of assets in Bitcoin ETFs, accumulated over the years.
Since its conversion into an ETF, Grayscale’s Bitcoin Trust has witnessed significant daily outflows, with holders selling off BTC at a rate of $500 million per day. While some of these assets have transitioned to newer competitors with lower management fees, analysts acknowledge the considerable selling pressure exerted by the firm.
Balchunas expressed concern over the daily outflows, stating, “This is some serious daily outflows for The Nine to have to battle every single day… They’ve done a great job so far, but damn, it’s a lot to ask.”
Following the ETF launch, Bitcoin experienced a decline to a yearly low of $40,300 on Friday, down from $49,000 just after the ETFs went live. Some investors interpret this price drawdown as indicative of a “sell the news” event.
In contrast, gold and silver prices have remained relatively stable this month, with gold hovering around $2000 per ounce and silver around $22 per ounce.
Bitcoin is often likened to gold and silver by its advocates as a hedge against monetary debasement. BlackRock CEO Larry Fink, in support of the Bitcoin ETF launch, has consistently referred to Bitcoin as “digital gold.” However, gold retains its position as the largest commodity ETF in the U.S., with related funds managing $95 billion. The total market cap of gold is estimated at $13.59 trillion, significantly surpassing Bitcoin’s $796 billion.
Despite approving Bitcoin ETFs, SEC chairman Gary Gensler emphasized last week that Bitcoin should not be readily compared to gold. He highlighted the utility differences, noting that while metals in ETFs have consumer and industrial uses, Bitcoin is primarily a speculative and volatile asset with implications for illicit activities such as ransomware, money laundering, sanction evasion, and terrorist financing.
