US-listed bitcoin exchange-traded funds (ETFs) saw $4.6 billion worth of shares trade hands in their first session, according to LSEG data released on Friday, as investors leapt in after the landmark products were approved by the US securities regulator.
The products mark a watershed moment for the cryptocurrency industry that will test whether digital assets, still viewed by many professionals as risky, can gain broader acceptance as an investment.
Eleven spot bitcoin ETFs – including BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, among others – began trading Thursday morning, kicking off a fierce competition for market share.
Grayscale, BlackRock and Fidelity dominated trading volumes, the LSEG data showed.
The green light from the US Securities and Exchange Commission for the products finally came late on Wednesday, following a decade-long tussle with the crypto industry.
Some executives called out bitcoin as a high-risk investment, and Vanguard, the largest provider of mutual funds, said it had no plans to make the new batch of spot bitcoin ETFs available on its platform to its brokerage clients.
The SEC had earlier rejected all spot bitcoin ETFs on investor protection concerns. SEC Chair Gary Gensler said in a statement that the approvals were not an endorsement of bitcoin, calling it a “speculative, volatile asset.”
The regulatory nod sparked intense competition for market share among the issuers, some of whom slashed the fees for their products well below the US ETF industry’s standard even before Thursday’s launch.
Estimates for how much spot bitcoin ETFs could reel in vary widely. Analysts at Bernstein estimated that flows will build up gradually to cross $10 billion in 2024, while Standard Chartered analysts this week said the ETFs could draw $50 billion to $100 billion this year alone. Other analysts have said inflows could be $55 billion over five years.
Crypto Risk Fears
Some analysts cautioned that the euphoria around the approval might be premature. The broader investment community still views cryptocurrencies as risky, with scandals such as the implosion of crypto exchange FTX in 2022 adding to investors’ wariness.
A Vanguard spokeswoman said the firm had no plans to launch its own crypto investment products, and that its focus remains on core asset classes such as stocks, bonds and cash, which it views “as the blocks of a well-balanced, long-term investment portfolio”.
Speaking at a webinar on Thursday, Sharmin Mossavar-Rahmani, head of the Investment Strategy Group and chief investment officer of Wealth Management at Goldman Sachs, said cryptocurrencies had no place in an investment portfolio.
“When you think about it, where is there any value to something like bitcoin?” she said. “We don’t think it is an asset class to invest in.”
Still, some expect the products to pave the way for even more innovative crypto ETFs, including spot ether products.
- Reuters with additional editing by Sean O’Meara