The Early Success Of Bitcoin ETFs (Pre-Halving 2024)

How are the Bitcoin ETFs doing since they were first launched in January 10, 2024?

The SEC approvals signaled a new a financial instrument that gives exposure to the top cryptocurrency in the market greater. This has brought interest from top investment firms like Fidelity into Bitcoin.  

They have exceeded many expectations with phenomenal results that might have many people thinking. That is because the Bitcoin ETFs have performed spectacularly well, reaching record-high trading volumes of $7.69 billion in its first month.

Since launching in January, the spot Bitcoin ETFs have seen strong daily trading volumes, ranking among the top 10 most traded ETFs in the US. This indicates significant investor interest based on the inflows. Net inflows have stabilized at a healthy level, suggesting sustained investor confidence.

Although there were heavy outflows from the Greyscale Bitcoin Trust (GBTC), in their first month alone, the ETFs were seeing inflows totaling $125 million per day. The sell off from GBTC was offset by some of the demand coming from the ETFs.

To highlight the success, here are other indicators:

- The Bitcoin spot ETFs drew $1.9 billion in its first three days of trading.

- Blackrock's IBIT surpasses $10 billion in total AUM in March 2024, faster than any other to date since it was launched.

- Blackrock set a record with $3.7 billion in volume within a single day.

- Bitcoin (BTC) price rose to $68,818 on March 5, 2024, well above its $44,000 valuation prior to the ETFs. BTC eventually reached a new ATH at $69,170.63 on the same day (From Coinmarketcap).

- Cumulative volume of the ETFs reached $79.57 billion (3/4/24).

Figure A. Chart of Bitcoin ETF Volume (In USD)

According to reports, what took the first gold ETF 2 years to reach $10 billion only took 2 months for Blackrock's IBIT ETF. SPDR Gold Shares (GLD) took more than two years to reach that amount following its launch in 2004.

This is happening despite major wealth managers not yet fully embracing the ETFs. Mainstream brokerage firms like Vanguard have yet to enter the market (Here is why Vanguard is not interested). Their involvement could lead to even greater inflows.

The launch of the Bitcoin ETFs seems positive thus far. They have brought new investors to the table since it offers a more traditional investment option for existing crypto enthusiasts.

The demand for Bitcoin is actually more than the supply. According to data, the balance of BTC in digital exchanges is at a lower level (1.84 million BTC on March 6, 2024). The current amount of BTC that miners are producing totals 900 BTC (based on current block subsidy of 6.25 bitcoins) a day, while the demand for the asset is 3,500-4,300 bitcoins a day.

After the upcoming halving in April 2024, the new supply of BTC is going to become even less. The reward for mining a block will fall to 3.125 bitcoins, making the asset more scarce.

This is just the beginning, so overall growth remains to be seen. The outlook for long-term success remains positive given the features of Bitcoin as a store of value and hedge against inflation.