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What we’ve learned from the launch of bitcoin ETFs in the US

Notes from the CIO

The launch of spot bitcoin ETFs in the US has been a watershed moment for investors. While many investors outside the US already have access to crypto ETPs, including those that track diverse indices of digital assets, the US market is slowly starting to catch up. These products are opening up a $50 trillion market of wealth managers, financial advisors, and retail investors that now have access to bitcoin in the familiar structure of an ETF. 

The 10-year road to get here was long, and the months leading up to the January approvals were shrouded in speculation and anticipation of the impact these ETFs would have. Now that there is a month of performance to evaluate, we can look at the impact of these launches—and what they mean for bitcoin—by answering three questions. 


1- What was the immediate impact of the ETFs?

There was a tremendous amount of excitement in the months and weeks leading up to bitcoin ETFs, alongside significant speculation over the impact these launches would have on bitcoin’s price. Following the January 11th debut, however, there was a short-lived price dip due primarily to GBTC, a long-standing bitcoin trust that converted to an ETF. 

At the time, GBTC held about $30 billion worth of bitcoin but lacked redemption options, which led to a significant net asset value (NAV) discount. Anticipating a trust-to-ETF conversion, many traders bought discounted GBTC shares. The approved conversion, alongside the new ETFs, triggered GBTC redemptions as shorter-term traders closed their positions and long-term investors exited the product. Despite inflows to other ETFs, the net effect became substantial bitcoin selling, pushing the price down. In the weeks that followed, however, GBTC redemptions slowed, while investment in other ETFs increased, leading to positive net inflows. In the month since, bitcoin ETFs have seen over $3.2 billion in net flows and bitcoin has risen over 27%.1 


2- Where do things currently stand? 

While it’s not surprising to see this large figure of new flows based on the pent-up demand for these products, the first month has exceeded our expectations and we believe the expectations of most of the experts that were following this closely. Because this is a new type of ETF, it’s difficult to make direct comparisons to other asset classes. But the strongest investment thesis for bitcoin right now is as an emerging store of value, or digital gold, so comparing bitcoin ETFs to gold ETFs is reasonable. A recent Coinbase Institutional report2 noted that the net inflows for bitcoin ETFs in their first month surpassed the inflows attracted by State Street's SPDR Gold Shares ETF (GLD) in its first month—which is also known to be one of the most successful ETF launches of all time. 


Looking at these numbers alone, it’s safe to say that the launch of bitcoin ETFs in the US was a massive success. But what’s more important than just these large numbers is what these new flows mean for the future of bitcoin’s investment case. It’s our belief that these ETFs have cemented in place bitcoin as a component in portfolios, one that will certainly grow over time. Having said that, we are still in the early stages of investor understanding of this asset class, and investors making an allocation to bitcoin is something that will play out over months and years, not just days and weeks.  


3- What does the last month tell us about the future of bitcoin ETFs? 

Bitcoin is now, once again, a $1 trillion asset. While there may still be factors that contribute to outflows from GBTC in particular, such as those relating to the Genesis bankruptcy, we do not see structural signs that demand for these products will slow down. The strong start and pace of inflows into bitcoin ETFs, which collectively have over $37B in assets, is a sign that these products could at some point overtake gold ETFs, which currently hold about $100 billion in assets. 

As we noted in our 2024 Crypto Investment Outlook, the investment case for bitcoin and many other crypto assets is as strong as ever. After a tumultuous 2022, last year was one of recovery for the industry and the work that went on to strengthen the ecosystem and its infrastructure, coupled with the ongoing institutionalization of crypto, is setting 2024 up to be a year where bitcoin, ether, and many other crypto assets will have the opportunity to shine.  

For long-term investors, we believe the current environment is providing an excellent opportunity to gain exposure to this space, as we anticipate the acceleration of institutional interest will only push prices higher over time. A small allocation to crypto can help improve portfolio performance and diversification benefits, and is becoming an increasingly important discussion among professional investors. 

 1Source: Messari, February 21, 2024

2 Source: Coinbase Institutional Weekly Market Commentary, ETFs’ Record Debut, February 15, 2024



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