Bitcoin recorded a historic 91-day profit-taking streak
As the value of Bitcoin rose slightly above $40,000, the market came under significant selling pressure, partly due to outflows from GBTC and attractive profit-taking. This trend sees long-term and short-term holders participating in profit-taking at levels not seen in many years.
This phenomenon continues to escalate. On January 18, the market saw a staggering profit of $900 million, showing the propensity of investors to make money. This follows Bitcoin's impressive price increase from $25,000 to $49,000 in January 2024, which far outweighs the pivotal role profit-taking played in shaping Bitcoin's price trend.
According to available data, the nine Bitcoin spot ETFs (excluding Grayscale's GBTC) have accumulated a total of 95,297 BTC, with total assets under management (AUM) of approximately $4 billion.
According to Bloomberg ETF analyst Eric Balchunas, this notable inflow underscores investors' growing appetite for digital assets and the growing acceptance of cryptocurrencies in finance. official.
1 billion USD club
While Fidelity's FBTC has slightly higher inflows, BlackRock's IBIT leads in AUM, holding $1.4 billion compared to Fidelity's nearly $1.3 billion.
Other notable ETFs include Invesco's ETF, which had its best day on January 19, attracting more than $63 million, although its total AUM has not exceeded $200 million. VanEck's ETF also showed similar performance and broke the $100 million mark in AUM on its sixth trading day.
Meanwhile, Valkyrie Investments and Franklin Templeton's AUM stood at $71.7 million and $48.6 million, respectively, on Jan. 19. WisdomTree has yet to surpass the $10 million mark.
This significant inflow into newly launched Bitcoin ETFs has outpaced outflows from Grayscale Bitcoin Trust (GBTC), causing its AUM to fall by $2.8 billion over the same period.
GBTC has seen its Bitcoin spot shares decline, posting a loss of $1.62 billion in the first four days. This indicates a shift in investor preference towards new ETFs that offer regulatory clarity and ease of access.
Despite the volatile nature of Bitcoin, which caused Bitcoin to sell off during the same period, these ETFs were still successful.
The US Securities and Exchange Commission (SEC) on January 19 opened comments on proposals related to Bitcoin ETF options trading.
An SEC announcement regarding a proposed rule change that would allow Nasdaq to list and trade options on BlackRock's iShares Bitcoin Trust.
The SEC's second announcement concerns a proposed rule change that would allow Cboe Exchange Inc. Lists and trades options for various Bitcoin exchange-traded products (ETPs). While the announcement did not say which funds the proposal applies to, Cboe BZX is responsible for listing and trading the majority of Bitcoin spot ETFs approved in January, including those from Ark Invest, VanEck, WisdomTree, Invesco, Fidelity, GlobalX, and Franklin Templeton.
Options trading will introduce new investment strategies for each fund. Specifically, this approach will allow investors to engage in leveraged trading, potentially earning higher returns with higher risk.
The SEC could decide to approve it in the coming months
Bloomberg ETF analyst James Seyffart commented on this development, noting:
“The SEC has acknowledged the 19b-4 requirement for the ability to trade options on spot Bitcoin ETFs. This speed is faster than the SEC's usual speed. The options could be approved before the end of February if the SEC wants to move quickly.”
Seyffart's other statements suggest the SEC could make a decision as early as around February 15 or as late as around September 21.
Seyffart also noted that each proposal was filed on January 16, meaning the SEC published its latest announcement just three days later. He said the latest developments were “significantly faster” than other proposed rule 19b-4 changes, which reached the same stage in more than 14 days.
Spot Bitcoin exchange-traded funds (ETFs) continued to crush expectations last week, and some of Wall Street's biggest names are playing key roles despite bosses like JPMorgan CEO Jamie Dimon continuing to criticize Bitcoin.
Authorized Participants (APs) include JPMorgan and trading giants Jane Street and Virtu Financial. According to U.S. Securities and Exchange Commission (SEC) filings, all three of these companies are included as APs for BlackRock's Bitcoin spot ETFs.
AP ensures that spot Bitcoin ETFs offered by BlackRock and Fidelity trade as close to the underlying value of the Bitcoin they hold as possible, giving investors the best possible deal.
Despite JPMorgan's role in the Bitcoin ETF ecosystem, Dimon called Bitcoin a "Pet Rock" at the World Economic Forum's annual meeting in Davos, according to the latest in a series of lengthy comments on electronic money.
However, even as Dimon sticks to his Bitcoin criticism, traditional financial firms are playing a key role with new ETFs, and they are doing very well.
Eric Balchunas, ETF analyst at Bloomberg Intelligence, said Wall Street giants “crushed” BTC ETF spot delivery on the first day of trading.
According to Balchunas, there were worries the ETF's shares could trade at a premium to the Bitcoin they represent, but authorized participants ensured the risk was minimized.
Based on whether the ETF is trading above or below the net asset value – the cost of the underlying Bitcoin they hold, these companies will create or redeem shares.
If it trades higher, they will need to create more shares, adding supply to the market and lowering the price. If it trades lower, regulators will buy back shares for cash, reducing supply.
Authorized participants do not directly handle Bitcoin, as creation and redemption are done in cash instead of the “in-kind” that issuers have unsuccessfully fought for.
A week after launch, the newly launched ETFs continue to trade within a narrow range relative to their net asset value.
On Wednesday, Balchunas said lower spreads mean better trades for investors and better opportunities to increase inflows into ETFs.
Sophisticated strategy
David Duong, head of institutional research at Coinbase, said via email that using fiat creation and redemption operations, rather than in-kind creation, means there is a “gap in settlement times.” maths".
This gap is the time between authorized participants receiving buy orders and when new shares are created. Authorized participants will therefore need to protect themselves from price fluctuations during these periods, possibly using pre-regulated products.
Bitcoin Futures ETFs experienced a brief renaissance following the launch of the spot fund. According to Coinbase, ProShares' Bitcoin Futures ETF, BITO, processed $2 billion in trading volume on the day the spot ETF launched, beating the previous record by more than 50%.
Volume dropped about 75% a week later, trading at $503 million in volume on January 18.
Institutional investors can use these types of funds to protect themselves during payout periods.
Balchunas said in December that readily available liquid products like the Bitcoin Futures ETF act as “parking spots.” Because BITO has high liquidity, it means holders can sell shares for cash easily – companies that manage Bitcoin spot ETFs can hold it as a type of convertible to reduce volatility risk. as they create and redeem shares in the newly launched Bitcoin spot ETF.
Coinbase's report said:
“Despite this decline, we view BITO as remaining an integral part of the Bitcoin ETF space,” referring to the 75% drop in trading for the week.
Coinbase said authorized participants “will continue to rely on regulated hedging vehicles, such as Long in CME futures or Long BITO in equity creation.”
These products protect companies against Bitcoin price fluctuations because they align shares with net asset value.
According to Coinbase, some of these companies may have taken their hedging strategies a step further.
Buy soon
Coinbase analysts, led by Duong, suspect some authorized participants purchased Bitcoin before launch.
The exchange's report said some authorized participants “likely purchased Bitcoin in preparation for the ETF launch,” while also selling Bitcoin Futures ETFs “to hedge their purchases and sales.” customers during the day.
Coinbase's hypothesis is “consistent with the evidence in the report,” Duong said, specifically the narrow spread between CME Bitcoin futures and spot. This difference refers to the difference
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