Reflecting on the BTC ETF Launches

Written by
Thomas Restout, Group CEO, B2C2


January 22, 2024

The initial reaction to the new BTC ETFs has been highly positive, with close to $2 billion in inflows and a trading volume of $4.6 billion within the first three days of the launch. B2C2 has been instrumental in facilitating flows for a number of these new ETFs.

To contextualize, the $1.9 billion in Assets Under Management (AUM) for Bitcoin ETFs has outperformed the launch of the ProShares ETF on BTC futures, which attracted $1.2 billion after three days in 2021, and has also exceeded the SPDR Gold Shares ETF on gold launched in 2004.

The SEC's decision to approve the launch of ETFs by some of the world's leading asset managers, in conjunction with the growing digital asset industry, is significant for several reasons:

  1. Accessibility to Bitcoin Investment: It facilitates Bitcoin investment for a broader range of investors who may have been hesitant due to the complexities of physical investments, regulatory concerns, or specific product constraints. These investors now have access to Bitcoin on major exchanges such as CBOE, Nasdaq, and NYSE or through top tier Authorized participants such as JP Morgan.
  2. Recognition by Regulatory Authority: This development is a notable step towards the recognition and regulation of the digital asset class by an influential authority like the SEC.
  3. Confidence in Digital Assets: ETFs signify a pivotal moment as major global money managers express confidence in the digital asset space, responding to increasing client demand for exposure to the best-performing asset in three of the last four years. This decision underscores the maturation and recognition of cryptocurrencies as a legitimate and attractive investment class in the global financial landscape.

The involvement of leading asset managers, the role of top-tier banks as Authorized Participants and the most reputable exchanges listing these ETFs contribute to the credibility and stability of the ecosystem.

However, the market's reaction post-launch of these ETFs seems to have fallen short of some participants' expectations. Notably, the ETF narrative has gained traction since the June 2023 filing from iShares. Unfortunately at the same time, newsflow around Binance and Coinbase took away the spotlight. It was only in September, as deadlines approached for the SEC to make a decision that  confidence grew regarding their approval. BTC was trading around $26,000 at the time. Since then, the market has been very supportive of developments in the ETF space, propelling Bitcoin to a high of $49,000. This is indeed spectacular price action!

Despite this, Grayscale's outflows present a contrasting picture. It is important to consider:

  1. Premium and Discount Dynamics: Some GBTC shareholders had purchased GBTC at a premium of up to 38%. That is to say they bought BTC 38% above market price. During 2022 and 2023, GBTC traded at a discount, with the lowest point at almost 50% in December 2022. That meant the BTC holder could only sell their BTC at 8.5k at the time… The conversion to an ETF eliminated this discount, leading some investors to exit their positions.
  2. Market Positioning: The reduction in the discount in recent months, as the probability of conversion to an ETF increased, made a long position in GBTC and a short position in BTC a strategic move for traders. Particularly after the iShares (BlackRock) ETF application filing in June 2023 when the discount started to reduce. These trades are now being unwound.

Overall, these developments represent a significant stride for the industry. As a major liquidity provider, B2C2 salutes the decision of the SEC, the entry of tier 1 participants and continues to offer services to support Bitcoin liquidity for various ETF providers. We are looking forward to the introduction of additional ETFs.

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About B2C2

More than just a liquidity provider, B2C2 is a digital asset pioneer building the ecosystem of the future.

The firm has unlocked institutional access to crypto by providing reliable liquidity across market conditions. B2C2’s success is built on crypto native technology and continuous product innovation, making it the partner of choice for diverse institutions globally.

Founded in 2015 and majority owned by Japanese financial group, SBI, B2C2 Ltd is headquartered in the UK, with offices in the US and Japan.

B2C2 Ltd is registered in England and Wales under company number 07995888 with its registered office at 86-90 Paul Street, London, EC2A 4NE.  B2C2 Ltd is the parent company of the B2C2 group of companies. Products may be provided by different members of the B2C2 group of companies, depending on the jurisdiction of the client and the regulatory status of the product and/or B2C2 group member. B2C2 is a registered trademark.

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