This Wednesday finally saw the long-awaited approval of the first spot-based Bitcoin ETFs in the USA. Just one day later, trading began for eleven different Bitcoin ETFs, which broke all records with a total trading volume of USD 4.6 billion.
It took over a decade from the Winklevoss twins' initial application for the US Securities and Exchange Commission (SEC) to approve the first spot-based Bitcoin ETFs. Anticipation was correspondingly high and the first day of trading was by no means disappointing. Over USD 4.6 billion worth of shares changed hands - almost half of which was accounted for by the newly converted ETF Grayscale Bitcoin Trust (GBTC). All this despite trading complications at some brokerages.
Subscribe to our newsletter
The best articles of the week, directly delivered into your mailbox.
Two Bitcoin ETFs break the USD 1 billion mark on first day of trading
The SEC approved a total of eleven different spot Bitcoin ETFs. The products only differ slightly in their fee structure. There is just one exception: the Grayscale Bitcoin Trust (GBTC) started with a considerable head start. The flagship product of crypto asset management giant Grayscale had been trading as a closed-end fund since 2013 and already managed around USD 28 billion in Bitcoin before the spot ETFs were approved. The SEC's green light transformed GBTC into a publicly tradable ETF.
Due to the significantly higher fees of the GBTC ETF - 1.5% per year compared to an average of 0.3% for other providers - many trust holders switched their shares into the newly created funds. As a result, the trust recorded a significant trading volume of USD 2.3 billion on the first day of trading. Previously, the BlackRock U.S. Carbon Transition Readiness ETF held the record with USD 1.16 billion, shortly followed by the first futures Bitcoin ETF (BITO) with just over USD 1 billion. BlackRock's iShares Bitcoin Trust (IBIT) achieved a similar trading volume to the previous two record holders. With a combined volume of USD 4.6 billion, the launch of the spot Bitcoin ETFs can be labeled a total success.
Record volumes despite complications for some traders
However, some brokers blocked trading in the newly launched spot Bitcoin ETFs. For example, Vanguard, the second-largest provider of index products, refused to offer the Bitcoin products to its brokerage clients, WSJ reported. Crypto investments were not in the asset manager's focus on asset classes that are "building blocks of a balanced, long-term investment portfolio". The contradiction: before the conversion to an ETF, the closed-end Grayscale Bitcoin Trust was freely tradable, now only sales are possible. Vanguard customers can still trade the futures ETF BITO, which is less efficient for investors. The product provider did not immediately respond to an inquiry from CVJ.CH.
Observers reported similar restrictions at leading brokerages such as Citi, Merill Lynch, Edward Jones and UBS. The Swiss banking giant, which has been skeptical of Bitcoin for years, declined to comment to CVJ.CH. However, in an interview with the crypto publication Coindesk, a UBS insider said that some selected clients will be given access to the Bitcoin ETFs. Citigroup also only offers the products to institutional clients. Interactive Brokers does not allow Swiss clients to trade crypto products at all. Given these complications, the record volume of spot Bitcoin ETFs is even more impressive.
Controversial decision within the SEC
It should also be noted that the SEC's approval was only narrowly successful by three votes to two. Chairman Gary Gensler spoke the decisive "yes" for the majority, but was once again critical of Bitcoin in a detailed blog post. He stated that the authority had now approved a spot ETF due to the legal setback against Grayscale. However, this would not change the fact that the vast majority of all crypto-assets violate federal securities laws. Bitcoin is also a purely speculative investment anyway.
"Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto." - Gary Gensler, SEC Chairman
SEC Commissioner Caroline Crenshaw criticized the sector even more strongly. She expressed extreme concern that these products will flood the markets and end up directly in the retirement accounts of US households who cannot afford a total loss due to "apparently widespread fraud and market manipulation". Commissioner Hester Peirce and Commissioner Mark Uyeda once again took the opposing stance. Critics questioned the actual technological neutrality of the authority following the questionable blog posts of the democratic commissioners.