BTC Volatility Shrinks Amid Continued Investment Inflow into BTC Spot ETFs

By Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International (CSE:FNQ)

Bitcoin (BTC) wrapped up the week at around $41,600, marking a slight 0.4% from the prior week’s closing value of approximately $41,750. The price displayed reduced volatility compared to the previous weeks, finding increased stability following the SEC’s approval of the ETFs, putting an end to speculation on the matter.

The introduction of the new BTC Spot ETFs attracted funds from traditional finance to the digital assets market. The 11 Spot ETFs collectively attracted around $1.15 billion in cumulative inflows since their launch. Leading the pack are the Blackrock Spot ETF, boasting about $1.40 billion in assets under management (AUM), closely followed by the Fidelity Spot ETF with approximately $1.26 billion in AUM.

This influx was partly offset by the fact that among the 11 Spot ETFs launched, one was the Grayscale Bitcoin Trust (GBTC). GBTC, not a new product but a Trust trading since 2015, underwent conversion into an ETF. This product experienced substantial outflows of about $2.81 billion since the conversion, reducing the total inflow of the 11 BTC Spot ETFs from about $3.96 billion to $1.15 billion.

At the time of conversion, GBTC held approximately 620,000 BTC, which has now reduced to roughly 552,000 BTC. The strong outflow can be attributed mainly to two factors: firstly, GBTC customers were restricted from redeeming shares and could only sell them on the secondary market due to the product’s structure, before the conversion. This compelled many customers to hold their positions for years without an exit option unless they were willing to sell at a significant discount in the secondary market. Secondly, the higher management fee set by Grayscale (1.5%) compared to most competitors (0.2%/0.3%) led some investors to withdraw their investment from Grayscale, either to cash in profits or reinvest in more cost-effective ETFs.

The BTC Spot ETFs experienced robust activity with high trading volumes. Since the launch, the cumulative trading volume of the 11 Spot ETFs amounted to about $16.6 billion in six days of trading, averaging about $2.77 billion daily. As anticipated, GBTC saw the highest volume, given the massive amount of BTC held in custody and the dynamic activity related to the Trust’s conversion into an ETF.

With the successful launch of BTC Spot ETFs, market participants and analysts are now turning their attention to the potential inclusion of different digital assets in ETFs. Analysts predict, with over a 70% likelihood, the approval of Ethereum (ETH) Spot ETFs this year. This expectation is reinforced by analysing ETH’s price action. Immediately after the approval of BTC Spot ETFs, capital shifted from BTC to ETH. ETH appreciated by 17% against BTC in the approval week and 11% in dollar terms, indicating that market participants are banking on the approval of ETH Spot ETFs following the green light for BTC Spot ETFs and are adjusting their positions accordingly.