In the first two trading days, new Bitcoin Exchange Traded Funds (ETFs) in the US market have magnetized nearly $1 billion. This influx signals a cautious yet warm welcome to these fresh stock market vehicles that mirror the price of Bitcoin.

The Influx of Investments

Following their introduction last Thursday, these newborn funds, including prominent names like BlackRock, Franklin Templeton, and Invesco, have witnessed a staggering $984 million inflow, as per CoinShares data. Leading the pack is BlackRock, the globe’s top asset handler, funneling $508 million into these ETFs, closely tailed by Fidelity with $442 million.

The launch marks a celebratory milestone for cryptocurrency advocates, especially after the US Securities and Exchange Commission greenlit the funds, ending a decade of waiting. This move is seen as a magnet for new investors, potentially buoying Bitcoin’s value over time.

The Market’s Mixed Reactions

Despite the high hopes, the market’s reception has been lukewarm. The anticipation around the approval of these Bitcoin ETFs had previously fueled a more than 70% surge in Bitcoin’s price since October. Yet, following the approval, Bitcoin saw a 6% decline. Ilan Solot from Marex Solutions remarked on the subdued launch, highlighting that the hype did not match the market’s immediate reaction. This tepid start starkly contrasts with the roaring success of ProShares’ Bitcoin futures ETF, which amassed $1 billion in just two days back in October 2021.

Grayscale’s Shift and the Market Dynamics

Amidst this new wave, Grayscale, managing the world’s largest Bitcoin fund, observed $579 million in outflows in the same period, coinciding with its transition to an ETF. This change, following a legal triumph over the SEC, was expected to streamline Bitcoin ETF approvals.

Zach Pandl from Grayscale noted that after the valuation surge, some profit-taking was natural. Interestingly, the shift also prompted a reshuffling in the investment landscape. Grayscale, once operating as a closed-end fund and now liquid as an ETF, faced selling pressures, partly due to

its relatively higher fee structure. James Butterfill of CoinShares pointed out this dynamic, hinting at the strategic reallocations made by investors. While the new Bitcoin ETFs mark a significant milestone, some brokers, like Vanguard, have opted out of offering these products, citing a misalignment with their long-term, balanced investment portfolio strategy. This cautious stance is reflected in the broader market, with investment advisors taking time to familiarize themselves with these products before incorporating them into client portfolios.

Conclusion

The introduction of US Bitcoin ETFs has undeniably stirred the market, attracting substantial investments and sparking a shift in investor strategies. Although the response has been mixed, with fluctuations in Bitcoin’s price and varying investor preferences, the long-term prospects of these ETFs in reshaping the investment landscape remain a focal point of interest and optimism.

Source: https://www.ft.com/content/07ae8c61-4ba0-4364-b6be-2765f007a093