In January 2024, the US Securities and Exchange Commission (SEC) finally approved spot Bitcoin ETFs, a moment awaited by the crypto for 13 years. However, BTC dropped right after trading commenced. Itez sought to investigate whether spot Bitcoin ETFs met investors’ expectations and why Bitcoin fell off the cliff.
What is a Spot Bitcoin ETF
Spot Bitcoin ETFs enable investors to profit from cryptocurrency growth without directly purchasing coins. Instead, market participants can buy shares of an exchange-traded fund (ETF) tied to the price of the underlying asset, BTC. In that case, investors are relieved from worrying about cryptocurrency storage. Large companies and funds, in turn, can legally earn money on crypto. Read more about spot Bitcoin ETF mechanics and why ordinary people, companies, and states need them.
Until January 2024, only Bitcoin futures ETFs were available on the American market. These were launched in 2021. Market participants use Bitcoin futures ETFs to speculate on asset price predictions through contracts that allow them to buy or sell cryptocurrency at a predetermined price on a certain date and time. If your forecast never worked, the deal should be closed anyway, even with a loss.
Spot ETFs, in contrast, allow you to buy and sell shares linked to the current exchange rate of Bitcoin. Investors can choose themselves when to buy or sell. Read more about the difference between futures and spot tools.
Bitcoin ETFs in the USA first steps
On January 10, 2024, the SEC approved all 11 applications for spot Bitcoin ETFs launch. Even Grayscale received permission. The company has been seeking approval to transform its Bitcoin trust into a spot Bitcoin ETF since 2021.
The tool was launched on three American exchanges: NYSE Arca, Cboe BZX, and Nasdaq. Here is the full list:
- NYSE Arca: Grayscale Bitcoin Trust (GBTC), Bitwise Bitcoin ETF (BITB), Hashdex Bitcoin ETF (DEFI).
- Cboe BZX: ARK 21Shares Bitcoin ETF (ARKB), Invesco Galaxy Bitcoin ETF (BTCO), VanEck Bitcoin Trust (HODL), WisdomTree Bitcoin Fund (BTCW), Fidelity Wise Origin Bitcoin Fund (FBTC), Franklin Bitcoin ETF (EZBC).
- Nasdaq: iShares Bitcoin Trust (IBIT), Valkyrie Bitcoin Fund (BRRR).
On the first day after the launch, spot Bitcoin ETFs trading volume reached $4.6 billion. In comparison, the Bitcoin futures ETF in the United States showed $20 million in trading volume (230 times less) during its first day.
🥇GBTC took the first place in terms of trading volume. On the first day, it reached $2.29 billion. On the third day, $1.01 billion. On the 24th of January trading volume dropped to $620 mln.
🥈IBIT took second place. On the first day, its trading volume reached $1 billion, and on the third day, it dropped to $372 million. On the 24th of January trading volume dropped to $268 mln.
🥉 FBTC took third place. On the first day, its trading volume reached $687 million. On the third day, trading volume decreased to $322 million. On the 24th of January trading volume dropped to $261 mln.
Spot Bitcoin ETFs trading volume. The five most popular tools are marked in different colors. The larger part of the bar it occupies, the greater its trading volume. GBTC has the largest trading volume — the dark blue part of the bars.
Right after the second day of trading, the GBTC market share began to decline. On January 12, it accounted for 58% of the market; by January 24, it had decreased to 47.64%. The IBIT and FBTC shares changed as well. The iShares Bitcoin Trust dropped from 22,09% to 20,99% and the iShares Bitcoin Trust gained, on another hand, grew from 15,13% to 20,41%.
Share of spot Bitcoin ETFs in the market as a percentage.
Bloomberg considers spot Bitcoin ETFs launch results "exemplary". The analyst Eric Balchunas noted that before the spot version was revealed, the ETF market had never seen such significant trading volumes.
Since the start of trading, spot tools steadily replaced futures tools, with the spot Bitcoin ETF market share growing from 69.48% to 81.99% by January 24.
Spot Bitcoin ETFs (blue area) with futures Bitcoin ETFs (pink area) market share. Assets began to flow from futures to spot ETFs.
According to the crypto community calculations, spot Bitcoin ETF issuers had already purchased 34,589 BTC for their tools. In comparison, the second-largest Bitcoin investor among public companies, Marathon Digital Holdings Inc., has 15,174 BTC, or half as much. The first one, MicroStrategy, has five times more, 189,150 BTC. If spot Bitcoin ETFs issuers continue to purchase cryptocurrency, then, by February 1, they will even be ahead of MicroStrategy.
If everything is so good, then why is Bitcoin dropping
Bitcoin started to decline on January 11, 2024, the very next day spot Bitcoin ETFs trading was launched in the US.
On January 13, Bitcoin lost 15% of its price and then entered a sideways movement; it had stopped both growing and falling.
There can be three reasons for BTC's decline.
Market participants lose interest. Before the launch, investors bought cryptocurrency in anticipation of a positive SEC decision. As tools were launched, the influx of newcomers dried up, leading to a loss of interest.
Disappointment. The charts show that trading volume for spot Bitcoin ETFs has been declining since day one. Potential investors could be disappointed by such a dynamic.
Standby mode enter. Many do not believe that a spot Bitcoin ETF launch will change the digital asset market overnight, attract tons of institutional money, and make BTC skyrocket. Therefore, they perceive the approval as a “selling the news" event. We are talking about the news that market participants use to sell an asset to fix profits because they believe that asset's rate has presumably reached a local maximum.
Even before its launch, the spot Bitcoin ETF divided the crypto community into two camps: some believed that it would send BTC and the entire market to the moon; others expected big problems. In November, we collected opinions from both sides in one review. Read and judge who was right: How a spot Bitcoin ETF splits the market into optimists and pessimists.
Why Bitcoin could rise in 2024
Following the launch of the highly anticipated spot Bitcoin ETFs, the SEC began receiving applications to launch leveraged spot Bitcoin ETFs. Traders can use them to earn money using borrowed funds.
The watchdog also received applications for spot Bitcoin ETFs options. Traders use them to launch investment contracts with predetermined conditions for the purchase or sale of an asset, almost like with futures. But in the case of futures, both the buyer and the seller must fulfill their obligations under the contract. In the option case, only one side has obligations. For example, the seller undertakes to sell an asset at an agreed rate on a set day, and the buyer may or may not buy it back.
The approval of new tools could accelerate BTC spot ETF market growth.
But there is something more that could trigger a new Bitcoin rally — halving. If the speed of the BTC network does not change, it will occur in April 2024. In summer, we talked about halvings’ positive effect on the Bitcoin rate and the levels the cryptocurrency can reach at this time.
Are we supposed to be eager to buy Bitcoin?
The spot Bitcoin ETF has been one of the most anticipated tools in the US. Although trading started successfully, the BTC exchange rate declined. However, it is too early to draw any conclusions and get upset; the spot Bitcoin ETF market is just gaining momentum.
Many analysts give positive Bitcoin 2024 price predictions. If their assumptions are correct, then buying Bitcoin today could bring good income this year. You can purchase BTC with a bank card using fiat within itez. Use Google Pay and check your wallet in a few minutes. Purchases up to 300 euros go without verification.
🤔 Do you think the launch of spot Bitcoin ETFs was successful?
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This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
