On Thursday -- just 30 minutes after the launch of the first US spot ETFs -- bitcoin touched a 21-month high of $49,051.
The peak of the hype in the first half hour is exactly what you would have expected but in the two days that followed, it's fallen 12%, raising some big questions about what comes next.
First off, there was no way the results were going to match the hype. US investors already have plenty of ways to access bitcoin, including via Coinbase and other exchanges, the BITO futures ETF and many other highly-correlated products. There's something to be said about a pure spot ETF that owns the underlying asset but how big is the market for it really?
The results from the first two days are sobering.
I had conservatively estimated at least $4 billion in inflows into the 11 ETFs based on the experience in Canada, where the BTCC ETF attracted $421 million in inflows in the first two days of trading.
Consider:
- The US is 10x bigger than Canada by population
- The US is even larger when adjusting for GDP and FX
- International investors would be much more inclined to buy a US ETF than a Canadian one
- The fees around 0.2% are much lower than the 1.5% in Canada
- The hype was much larger for the US ETFs
Again, because of all that I thought inflows of $4 billion were very conservative.
So what are the results?
Just $1.4 billion is sitting in the 10 truly new ETFs -- a drop in the bucket of the $840 billion market cap of bitcoin.
Even worse, the Grayscale GBTC ETF, which converted from a closed end fund, saw $579m in outflows and the pre-existing BITO futures ETF saw $151m in outflows so the net inflows were just $652 million. That's scarcely 50% more than the Canadian one. In fact, after the first two days of trading, the Canadian ETF at $421 million would rank in third place, only scarcely behind the Fidelity FBTC at $422m and Blackrock's IBIT at $498 million.
Now, some are trying to spin the individual ETF AUM numers as a success against the long history of 3000 ETFs but comparing these launches to the no-hype, no-demand launches of the myriad of ETFs out there is entirely disingenous. This was the event that spurred a 50% rally in bitcoin's price; all for just 0.077% of its market cap and got wall-to-wall coverage on CNBC.
To see just how disappointing this is, you only have to go back to some pre-launch estimates.
For some more-credible estimtates:
- Standard Chartered predicted $100 billion of flows into bitcoin ETFs by end of this year.
- Bloomberg predicted $50 billion by year end and as much as $4 billion in day one
Even if you ignore the $30 billion which should flow out of the high-cost GBTC into the 10 low-fee ETFs, those numbers now look wildly optimistic.
A crypto ETF launch is like opening weekend at a box office -- especially ETFs as well-advertized as these ones -- your opening weekend is highly predictive of the total take-home.
Again, the Canadian ETF is instructive. It's $421m two-day total only doubled at the end of two months, finished the year at $741m and didn't sustainably rise above $1 billion until this year (it's at $2b currently).
If the new ETFs follow that path, they would have just $2.4 billion by year end... and that's excluding GBTC, BITO, Coinbase and BTCC.U outflows.
The BITO futures ETF brought in $1.1 billion in its first two days in 2021, almost double the to $652m net of these new ETFs. It didn't get above $1.4 billion until October of 2023.
Looking at the 25 largest ETF launches ever, none of them have had meaningful flows beyond the first day since the stone ages of ETFs.
And here's a reminder of how bitcoin did after BITO:
Now some are arguing that it will take longer for institutional money to show up and that the post-launch fall in bitcoin wasn't exactly conductive to inflows. I agree there was also plenty of talk about sell-the-fact so maybe the tide turns if/when bitcoin prices start to rise but at this point, but I'm going to need to see it to believe it.
So far, I wouldn't classify this launch as anything less than disastrous.
