Bitcoin ETFs Bring Stability and Inflows to the Crypto Market

The crypto market has witnessed a period of low volatility and steady inflows as the US Securities and Exchange Commission (SEC) approved several Bitcoin (BTC) exchange-traded funds (ETFs) in the past week. The ETFs have attracted significant interest from traditional investors, while reducing the uncertainty and speculation that surrounded this development.

Bitcoin Price Remains Stable Around $41,600

Bitcoin’s price has stabilized, closing the week at around $41,600, experiencing a marginal 0.4% decline compared to the previous week’s closing value of approximately $41,750. The reduced volatility can be attributed to the recent approval of ETFs by the SEC, putting an end to speculation surrounding this development, according to Matteo Greco, research analyst at Fineqia International.

The introduction of Bitcoin (BTC) Spot ETFs has attracted significant inflows from traditional finance into the digital assets market, Greco said in a note shared with Cryptonews.com. He said that since their launch, the 11 Spot ETFs have collectively attracted approximately $1.15 billion in cumulative inflows.

“Leading the pack are the Blackrock Spot ETF, boasting about $1.40 billion in assets under management (AUM), closely followed by the Fidelity Spot ETF with approximately $1.26 billion in AUM.”

Grayscale Bitcoin Trust Sees Over $2.8 Billion in Outflows

The analysis revealed that Grayscale Bitcoin Trust (GBTC), which has been trading as a trust since 2015, recently underwent conversion into an ETF. Following the conversion, the product experienced substantial outflows of about $2.81 billion, reducing the net inflow of the 11 BTC Spot ETFs from $3.96 billion to $1.15 billion.

The outflows from GBTC can primarily be attributed to two factors, Greco said. Firstly, customers holding GBTC shares were previously restricted from redeeming them and could only sell them on the secondary market due to the product’s structure. This compelled many customers to hold their positions for an extended period without an exit option, unless they were willing to sell at a significant discount.

Secondly, the higher management fee set by Grayscale (1.5%) compared to most competitors (0.2%/0.3%) led some investors to withdraw their investments from GBTC, either to capitalize on profits or reinvest in more cost-effective ETFs.

Before the conversion, GBTC held approximately 620,000 BTC, which has now decreased to around 552,000 BTC.

Bitcoin Spot ETFs Witness Robust Trading Activity

The BTC Spot ETFs have witnessed robust activity, characterized by high trading volumes. In the six days of trading since their launch, the cumulative trading volume of the 11 Spot ETFs amounted to approximately $16.6 billion, averaging around $2.77 billion daily.

As expected, GBTC recorded the highest volume, given the substantial amount of BTC held in custody and the dynamic activity surrounding the Trust’s conversion into an ETF.

The approval of Bitcoin Spot ETFs by the SEC has been a long-awaited and highly anticipated event for the crypto industry, as it provides a more accessible and regulated way for investors to gain exposure to the leading cryptocurrency. The ETFs also offer advantages such as lower fees, higher liquidity, and tax benefits over other products.

Ethereum Spot ETFs on the Horizon

Following the successful launch of BTC Spot ETFs, market participants and analysts are now focusing on the potential inclusion of various digital assets in ETFs. Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is widely expected to be the next candidate for an ETF approval.

Several applications for ETH Spot ETFs have been filed with the SEC, but none have received a definitive response yet. However, some analysts believe that the approval of BTC Spot ETFs has paved the way for ETH Spot ETFs, as the SEC has shown a more favorable attitude towards the crypto market.

Ethereum, which powers the majority of decentralized applications (DApps) and smart contracts on the blockchain, has a strong use case and a loyal community that supports its growth and innovation. The approval of ETH Spot ETFs could boost the demand and adoption of the network, as well as its native token.