Bitcoin has corrected significantly following the approval and listing of the much-hyed 11 spot Bitcoin exchange-traded funds (ETFs) in the United States. At a point on Friday, the cryptocurrency shed about 10 percent, dropping below $42,000 from the $49,000 peak on the day before. However, it has corrected and is trading at around $42,700 as of press time.
Disappointing Demand for Bitcoin ETFs
Why did the market go in the other direction despite the massive anticipation for Bitcoin ETFs? Even experts previously anticipated that the ETFs would ease the entry barrier for retail and institutional investors to get crypto exposures directly from their brokerage accounts.
Although it has been only two days since the 11 Bitcoin ETFs have traded on the US exchanges, the numbers have been disappointing.
The ten newly listed Bitcoin ETFs attracted only $1.4 billion in new monies in the two days. None of the recently launched Bitcoin ETFs were even on the top US ETFs based on their first-day success despite the drums around their launch.
Along with the poor inflows, Grayscale’s Bitcoin ETF, which was converted from the Grayscale Bitcoin Trust, witnessed a $579 million outflow, and the previously existing BITO futures ETF endured $151 million in outflows. Considering these figures, the two-day net inflows in the Bitcoin ETFs are only $652 million, while the net spot Bitcoin ETF inflows was at $819 million.
Inflows into the 10 new bitcoin ETFs hit +$1.4 billion over 2 days.
Subtracting GBTC’s outflows of -$579m we get a net inflow of +$818.9m into the 10 new vehicles.
People rotating out of GBTC into the others & Grayscale selling BTC are behind the price dump despite the inflows: pic.twitter.com/L29Vp3QecP
— Joe Consorti ⚡ (@JoeConsorti) January 13, 2024
The Hype Could Not Pump New Monies
Although the industry created the hype around the US Bitcoin ETFs, such instruments were already available in several other countries. However, the capital market size of those countries is not comparable to that of the US.
Neighboring Canada launched a Bitcoin ETF, the Purpose Investments Bitcoin ETF, in February 2021. After the first two days of trading, the Canadian Bitcoin ETF had an asset under management of $421 million. Meanwhile, the Bitcoin ETFs launched by the two finance giants, BlackRock and Fidelity, have AUMs of $498 million and $422 million, respectively.
Interestingly, the Canadian Bitcoin ETF charges 1.5 percent in fees, while the US one is taking an economical approach, with the lowest fees being 0.2 percent (excluding conditional fee waivers).
After the two performances of the US Bitcoin ETFs, the long-term predictions of the inflows appear to be long-shots – Bloomberg predicted a $4 billion inflow on the first day and $50 billion by the end of the year, while the analysts at Standard Chartered were more bullish eying at $100 million by the end of 2024.
@BlackRock may break the first-day flow record with a possible $2 billion asset injection on the first day of trading for its US spot Bitcoin ETF, according to BI’s senior ETF analyst @EricBalchunas Seed funding could combine with grassroots interest to give it momentum in a… pic.twitter.com/cjUoSzsqgt
— Bloomberg Intelligence (@BBGIntelligence) January 10, 2024
Meanwhile, the stock price of the largest US Bitcoin exchange, Coinbase, is plunging about 30 percent from December’s peak. On last Friday’s trading session alone, Coinbase stock declined by 7.35 percent, shedding one more percent-point in the after-hours trading.