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The Bitcoin ETF launch has been one of the most successful in ETF history.

There are 9 “Newborn” ETFs that were launched i.e. ETFs that did not convert from other products like GBTC did from its previous life as a trust.

Collectively, these now hold about 40% as much Bitcoin as MicroStrategy holds. In just 5 days.

It took Michael Saylor almost 3 years to accumulate ~$8b in Bitcoin through MicroStrategy.

RESULTS SO FAR

Grayscale is the gorilla of the group.

It has had outflows of $2.2b so far. This was inevitable given its enormous $27b in Bitcoin AUM and previous structure as a trust (Bitcoin can go in, but can’t get out).

The limitations of it previous trust structure created a discount between the listed price of its shares compared to the value of assets held. This left many investors effectively stuck in GBTC until the ETF conversion.

The discount did close to less than 0.5% after the ETF conversion, having been as high as 48%, which gave investors the chance to cash out at minimal cost, and buy back into the newer and lower cost ETFs that are now available. e.g. some ETFs offer 6-12 months at ZERO fee.

Outflows from GBTC were inevitable given the set-up leading into the conversion to an ETF.

So far Grayscale has sent 47.9K BTC to Coinbase Prime - worth around $2b. It’s uncertain how much of Grayscale’s remaining $25b will exit, but given the much higher fund fee at 1.5% I doubt we have seen the end of the outflows.

FLOWS

• $1.1 billion in NEW MONEY net of all outflows.

• $3.3b into 9 new ETFs.

• $2.2b outflow from GBTC ($540m per day).

BlackRock’s iShares, and Fidelity, both now hold over $1 billion in assets each, putting them in the ALL-TIME TOP 5 for the fastest ETFs to reach $1b in assets.

Not impressed?

BlackRock and Fidelity were also in the top 5 for fund flows among ALL ETFs this week, right under ETF giants with hundreds of billions under management.

Let’s give this some more context.

ETFs are a pipeline to a new pool of funds that previously were unable to buy Bitcoin. There are trillions in advised capital that can now buy these ETFs which then have to buy the underlying Bitcoin.

It is the perfect Bitcoin on-ramp for Boomers who not only hold most of the wealth in the United States, but also love ETFs — and so do their wealth advisors.

ETFs typically take time to build up a base of assets under management. Here’s Bloomberg’s James Seyffart providing the perfect visual example.

Bitcoin ETFs as an asset class are already a success within an ETF context, now sitting in second position on the table of biggest commodity ETFs, in just one week of trading.

TRADING VOLUME

• $14.1b trading volume in total.

• $7.6b of this from GBTC

• BlackRock and Fidelity round out the top 3 with just over $2.7b and $2.1b each in volume.

Is that good?

Well, it’s better than every ETF launched in 2023 — combined, according to Bloomberg.

PRICE ACTION

So why is the price going down if the ETF is such a success?

ETFs are not the entire market. While they have attracted $1.1B in new capital, there are other sellers in the market, like Bitcoin miners, with reports that they have sold ~$450m this past week.

It’s also quite natural for the market to correct after an 84% price surge in just 16 weeks. Bitcoin hardly needs a reason to drawdown 20-30%, but consider the chart:

I just don’t see any seismic change in price behaviour that is out of the ordinary. 2023 was a bullish recovery from the bear-market lows, and a drawdown was always on the cards, with or without an ETF.

The good news is that the Bitcoin ETFs collectively are taking in more money than GBTC is shedding. So already they have been a net positive in bringing approx. $250m of new demand, which is about 6,200 Bitcoin each day.

We are yet to see how Bitcoin ETF flows behave when Bitcoin goes on an extended run, or breaks new all-time highs.

I am reminded of MacroScope17’s comments about on-ramps:

When BlackRock, Fidelity and co are spending big money on advertising, the Bitcoin price is breaking new all-time highs, there are TV anchors spruiking Bitcoin, and newspaper editorials about Bitcoin coming of age, and why every retirement plan should have a small allocation… this is when we will see the Bitcoin ETFs pull in money by the tens of billions.

My guess is $100b AUM is likely within 12 months if we see Bitcoin break new highs this year.

The party hasn’t even started yet.

Thank you for reading,

Archie