It may seem like a long time ago in a fast-paced crypto industry, but this year’s launch of spot ETFs for Bitcoin and Ethereum, in January and Julyrespectively, ushered in a seismic shift for the crypto industry.
Bitcoin spot ETFs have attracted mountains of cash and allowed investors to gain exposure to BTC without the hassle of managing private keys. They have also given legitimacy to the asset on Wall Street. Meanwhile, Ethereum spot ETFs validated the asset’s regulatory status. And despite a subdued debut, they’ve gained momentum in recent weeks and potentially opened the door to similar products for Solana and XRP in the united states
When Bitcoin ETFs began trading in January, the price of BTC reached $46,000. Almost a year later, the asset’s price has more than doubled. He even raped $108,000 in Decemberafter the impulse generated by Donald Trump’s victory in the White House.
As a group, eleven Bitcoin spot ETFs now hold $113 billion in assets under management, or AUM, according to glass coin. Bloomberg ETF analyst Eric Balchunas had said Decipher in early December that the amount of Bitcoin held by these products could exceed the estimate 1.1 million Bitcoins mined by the enigmatic creator of Bitcoin, Satoshi Nakamoto, before Christmas.
It turns out that the symbolic milestone was broken just two days later.
“It would be a fitting ending to the launch of a storybook,” Balchunas said at the time. “This is an anomaly in physics. “There has never been a launch like this and there will never be another.”
When it comes to spotting Bitcoin ETFs, the products brought “excitement, anticipation, opportunity, [and] legitimacy” to the asset, Balchunas added. Eliminating any friction associated with exposure to Bitcoin, he said the power of connecting investors with brands they know and trust in brokerage accounts cannot be overstated.
It is a marked deviation from the common refrain of “Not your keys, not your coins”, following the collapse of FTX in 2022, that is, the belief of many cryptocurrency fans that self-custody is the only reasonable way to own cryptocurrencies. By 2024, the value proposition of Bitcoin exposure without key management was too good for some investors to pass up.
Nathan Geraci, president of investment advisor The ETF Store, said Decipher who was always very optimistic about the prospects of Bitcoin ETFs. At the beginning of the year he provided that the group would “delete all ETF launch records that exist” before they started trending. However, he added, “net inflows into these products have exceeded even my extremely optimistic expectations.”
BlackRock enters the chat
With more than $53.5 billion in assets under management, BlackRock’s iShares Bitcoin Trust ETF (IBIT) emerged as an industry leader this year. Rising above Grayscale’s Bitcoin Trust (GBTC), the second-largest spot Bitcoin ETF by AUM at $20 billion, IBIT’s profile was boosted by BlackRock CEO Larry Fink, who highlighted Bitcoin as an investment. multiple times this year.
Once a Bitcoin skeptic, the CEO of the world’s largest asset manager described Bitcoin in January as a “potential long-term store of value” against governments that devalue their currency. Months later, Fink called himself a “great believer” into Bitcoin, framing the asset as an investment for those with an increasingly frightened view of the world.
When it comes to stores of value, Bitcoin advocates often compare Bitcoin to “digital gold.” Within BlackRock’s suite of products, that link crystallized in November, when IBIT AUM surpassed that of BlackRock’s iShares Gold ETF (IAU), first offered in 2005.
At the time of writing, it was ranked 32nd among all US ETFs by AUM, according to the ETF Database.
While analysts noted to Decipher Although BlackRock’s push into the crypto space eroded the industry’s stigma in 2023, Geraci said the stellar performance of Bitcoin spot ETFs was anything but a given.
“In January, I’m not sure anyone imagined the spot category of Bitcoin ETFs would eclipse $100 billion in assets before the end of the year,” he said. “In fact, there were many naysayers who thought the category would never reach that mark.”
A different market
Bitcoin spot ETFs saw massive amounts of inflows this year, but they also improved Bitcoin market structure, according to research from analytics firm Kaiko.
In June, Kaiko observed that the approval of spot Bitcoin ETFs had increased Bitcoin trading volumes on crypto exchanges, while strengthening the market’s ability to absorb large orders. At the same time, Kaiko analysts noted that Bitcoin trading activity was concentrated during the week, when Wall Street is open for business.
After calling himself “crypto president”In the election campaign, Trump’s re-election caused a record rally in the price of Bitcoin. In regards to BlackRock’s Bitcoin product, IBIT served as the connective tissue that allowed investors to trade Bitcoin in an unprecedented way.
Like Bitcoin jumped past $75,000 On November 6, the day after Trump’s re-election, IBIT’s trading volume surpassed $1 billion in 20 minutes. By the end of the day, IBIT’s trading volume had increased to $4.1 billion.
“For context, that’s more volume than stocks like Berkshire, Netflix or Visa saw today,” Balchunas wrote on X (previously known as Twitter).
In an interview, Balchunas noted that Bitcoin spot ETFs broke record after record this year, from trading volume statistics to an early pace of inflows. Of note, BlackRock’s Bitcoin spot ETF reached $10 billion in assets under management faster than any ETF ever launched in history. It was also the first ETF to reach $50 billion in assets under management, more than five times faster than any other ETF in history.
When the SEC approved listing and options trading for spot Bitcoin ETFs in October, analysts said Decipher The development would make it easier, cheaper and safer for institutional players to gain exposure to Bitcoin.
“Overall, I consider this another brick in the wall of standardization,” said Bitwise CIO Matt Hougan. Decipher. “We should be happy about that.”
Grayscale ravine
It would be impossible to capture the launch of Bitcoin spot ETFs without mentioning grayscale. was once the largest asset manager in the crypto space and his legal victory against the SEC last year paved the way for the eventual approval of the products.
The SEC delayed approving spot Bitcoin ETF applications for a decade, citing concerns about market manipulation. But the US Court of Appeals for the D.C. Circuit determined last August that the SEC’s repeated denial of Grayscale’s ETF tactic was unlawful.
While billions of dollars flowed out of GBTC this year ($21 billion, as of this writing), then-Grayscale CEO Michael Sonnenshein said the outflows were anticipated. In April, he pointed to the bankrupt masses of collapsed crypto companies, which were “forced” to liquidate GBTC holdings, among traders capitalizing on GBTC profits. discount that was once considerable due to its old structure.
Analysts also attributed GTBC’s outflows also go towards the product expense ratio, which stands at 1.5%. Grayscale makes the product more expensive to maintain than GBTC competitors, with expense ratios as low as 0.19%. responded with a GBTC-derived ETF with an expense ratio of 0.15%.
A similar dynamic occurred with the Grayscale Ethereum Trust (ETHE), which saw more than $1 billion in outflows during its first three days of trading as a full-fledged ETF, according to glass coin. While the bleeding has largely stopped, and Grayscale also launched a derivative ETF for ETHE, capital outflows dampened investor enthusiasm when Ethereum spot ETFs launched this summer.
Ethereum and beyond
Because SEC Chairman Gary Gensler had avoided questions Regarding Ethereum’s regulatory status, many doubted that Ethereum spot ETF applications would be approved under his leadership. in a impressive developmentHowever, the SEC gave the green light to the products in May.
A lawsuit filed by Ethereum software company Consensys also alleged that the SEC seen internally ETH as value. (Disclosure: Consensys is one of 22 investors in Decipher.) The distinction would have forced ETF hopefuls to follow a different path, but the SEC effectively validated Ethereum’s status as a commodity with its move.
Still, Ethereum spot ETFs have seen much smaller inflows than Bitcoin spot ETFs. Sold by $3.6 billion in ETHE outflows, the product pool of eight issuers has attracted $2.3 billion worth of inflows since its debut in July, at the time of writing, according to glass coin.
Meanwhile, ETFs have not been a salve for Ethereum’s price like similar products were for BTC. After reaching a high of around $4,100 in early December, the cryptocurrency is currently trading on hands. about $3,400. And unlike Bitcoin, Ethereum has not surpassed its all-time high mark in 2024, nor has it come close to doing so.
It makes sense that investors haven’t flocked to spot Ethereum ETFs, given that Ethereum’s story is relatively unknown compared to Bitcoin in the minds of mainstream investors, said FlaconX head of research David Lawant Decipher.
The narrative of Bitcoin as a store of value is well established, Lawant said. But regardless of whether Ethereum presents itself as a tech play, a smart contract platform, or an app store for Web3 applications, the narrative surrounding Ethereum is not as established outside of crypto circles.
“Ethereum is a different beast” compared to Bitcoin, Lawant said. “There are different ways to interpret it, but regardless of how you tell the story, it’s a different story.”
Currently, Bitcoin and Ethereum are the only digital assets with spot ETFs in the United States. However, along with hopes of a crypto-friendly SEC during the Trump administration, asset managers have filed for ETFs covering solarium, XRPand Litecoinamong a growing list of other digital assets. Even Dogecoin ETFs don’t seem so far-fetched in this climate, analysts said Decipher.
Whether or not applications for those cryptocurrencies are approved may be a question for Gensler’s intended successor. Paul Atkinsformer SEC commissioner and Trump’s nominee for office. Meanwhile, Bitcoin and Ethereum spot ETFs will be trading, after their first year with a high bar to aim for.
Edited by Stacy Elliott.
