US bitcoin ETFs pull in $871mn in first three days of trading

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Bitcoin exchange traded funds have pulled in just under $900mn in the first three days of trading, as investors cautiously welcome the new stock market vehicles that track the cryptocurrency.

The new funds, which include those from BlackRock, Franklin Templeton and Invesco, have had net inflows of $871mn, according to data from CoinShares, a digital asset manager.

BlackRock, the world’s largest asset manager, led the way with $723mn of inflows, followed by Fidelity with $545mn. The inflows were offset by $1.18bn of outflows at Grayscale, which converted its existing $28bn bitcoin fund into an ETF alongside the new launches.

Analysts believe the bulk of the outflows is likely to be investors moving to one of the new funds, which all charge lower fees than Grayscale. Excluding the outflows at Grayscale, the 10 new ETFs have drawn in just over $2bn.

Crypto enthusiasts celebrated the approval of the funds by the US Securities and Exchange Commission last week after more than a decade of rejections. Supporters hope it will attract new investors to the token and boost its price in the long term.

Growing speculation that the SEC would approve so-called spot bitcoin ETFs had pushed the price of bitcoin up more than 70 per cent since October. However, bitcoin has fallen roughly 6 per cent since their approval.

“By no means was this launch a mass success,” said Ilan Solot, co-head of digital assets at Marex Solutions. “Bitcoin’s latest price action shows that this has so far been an underwhelming launch for products that were so highly anticipated.”

The funds’ collective performance also fell short of the $1bn that ProShares pulled in on its first two days after launching a bitcoin futures ETF in October 2021.

Grayscale, which has run a bitcoin trust since 2013, helped open the door to regulatory approval for bitcoin ETFs after winning a court victory against the SEC last year. But analysts said its conversion last week offered investors an opportunity to exit their holdings.

Previously, investors had been able to sell their holdings only in the over-the-counter market, and they often traded at a large discount to the price of bitcoin.

“There’s a lot of shuffling around of deck chairs . . . because Grayscale was trading as a closed-end fund for so long, but as soon as it became an ETF it became liquid, so it’s not surprising to see selling pressure coming from Grayscale,” said James Butterfill, head of research at CoinShares.

Analysts also pointed out that Grayscale charged a 1.5 per cent fee, which is more than a percentage point higher than new market entrants.

“Following a sharp run-up in valuations, it’s natural to see some profit-taking from the investment community,” said Zach Pandl, Grayscale’s managing director for research.

Some brokers have declined to offer trading in the new bitcoin ETFs. Vanguard, the world’s second-largest asset manager, said the new products “did not align with its offer of a well-balanced, long-term investment portfolio”.

Analysts said flows into bitcoin ETFs would take time to materialise as advisers became comfortable enough with the products to recommend them as additions to client portfolios.

“This isn’t about day one. This is new for a lot of clients,” said an executive at one of the issuers who declined to be identified. “It’s going to take some time to have a full education and understand its role in a portfolio and ultimately choose to make an allocation to a product. What I’m most excited about is the long-term prospects. We are giving access to an entirely new market.”

Additional reporting from Steve Johnson in London