The historic launch of spot Bitcoin exchange-traded funds (ETFs) in the United States has led to a sell-off in the cryptocurrency market. Despite this, the ETFs have been successful in their first week of trading, a sentiment echoed by industry analysts.
From the first day of spot Bitcoin ETF trading on 11 January, Bitcoin’s value has fallen 6.6 percent from nearly $49,000 to $42,876. This sharp decline occurred mostly in the first two days of trading, with the intra-week low reaching $41,753.
Debut of spot Bitcoin EFT
While the spot Bitcoin ETFs did not cause a spike in Bitcoin’s price in their first week of trading as some prominent investors had expected, the funds themselves have had a successful start. The debut of spot Bitcoin ETFs in the U.S. was one of the most successful ETF launches in terms of trading volumes, with ten funds reaching a combined volume of $10 billion in the first three days.
Bloomberg ETF analyst Eric Balchunas noted that spot Bitcoin ETFs have seen unprecedented activity and volumes since their launch. He pointed out that all 500 ETFs launched in 2023 had reached a combined volume of $450 million so far, which is 2,100 percent less than what the spot ETFs achieved in just three days.
Large volume of sales
Most of the trading volumes came from the Grayscale Bitcoin Trust ETF (GBTC), which accounted for about 50 percent of the combined $10 billion volume in the first three days. GBTC has traded more than $6.3 billion so far, handling around $2 billion per day in the first two days of trading.
However, GBTC has seen massive selling following the ETF launch, with the fund seeing $1.2 billion in net outflows in the first three days of trading. While GBTC has been offloading large amounts of Bitcoin in the first days of trading, other spot Bitcoin ETFs have been increasing their Bitcoin holdings.
In the first four days after launch, GBTC sold a total of 27,122 Bitcoin, or 4.4 percent of its total initial holdings of 619,200 Bitcoin. On the other hand, other ETF issuers, including BlackRock, Fidelity, and ARK Invest, bought at least 40,000 Bitcoin combined.
BlackRock’s Bitcoin EFT holdings
BlackRock’s iShares Bitcoin Trust (IBIT), the second-largest spot Bitcoin ETF by holdings, increased its assets from 2,621 Bitcoin on January 11 to as much as 25,067 Bitcoin on January 17. According to the latest available data from ETF issuers, the spot ETFs hold 651,819 Bitcoin combined, or 3.32 percent of all 19.6 million bitcoins that have ever been issued.
The launch of spot Bitcoin ETFs in the U.S. has been seen by many as a “sell-the-news” moment, with some analysts suggesting that more pressure could come from the futures market. They believe that we’re likely seeing a short-term positioning adjustment and not a long-term trend reversal. However, unwinding an increase of more than 13,000 futures contracts is likely to create some churn in the price action.