Updated
The Securities and Exchange Commission (SEC) finally caved. After six years and the rejection of more than 20 exchange-rule filings, the SEC approved 11 spot Bitcoin
BTC
ETFs that would track the actual price of the main cryptocurrency. The announcement came after the market closed Wednesday.
On Thursday, the first day of trading, nearly all the new ETFs posted price declines by the close.
The newly approved spot Bitcoin ETFs, with their closing prices and daily volume:
Meanwhile, Bitcoin (BTC) surged to a two-year high of $49,000 before falling to $46,090, or up 0.65%.
“The approval of spot BTC ETFs is still a ‘sell the news’ event, but we believe it will be very shallow in the near term. If there are any material pullbacks in the bitcoin price during the short term, we believe it will be a great opportunity to add significantly more long positions,” said C.K. Zheng, chief investment officer at Crypto Hedge Fund ZX Squared Capital, a crypto-only hedge fund with assets under management of about $20 million. Started in 2021 and registered in the British Virgin Islands, the fund’s portfolio is 50% in Bitcoin and Bitcoin derivatives and 50% in Ether (ETH
ETH
) and Ether derivatives. “On the other hand, we believe ETH is relatively undervalued as the Bitcoin has totally outshined ETH since BlackRock
BLK
initiated the launch of its Bitcoin spot ETF last year.”
For more than a decade, investors have asked the SEC for an ETF to gain exposure to bitcoin, the world’s largest cryptocurrency. This is because of the difficulty in trading and holding cryptocurrencies. ETFs are funds that trade like stocks during the market’s trading hours. They are bought and sold like stocks and charge lower management fees that most mutual funds and lower commissions for trading on a crypto exchange. Strictly speaking, these type of ETFs are better known as ETPs, or exchange-traded products, that have been investing vehicles trading commodities and currencies since 2006.
The first proposal for a spot Bitcoin ETF was filed in 2013. But it was not until 2018 that the SEC began looking closely at the idea. This was because the previous year the Chicago Board Options Exchange (CBOE) listed the first bitcoin futures contracts. Wednesday’s move was a radical change of course for the SEC which, since 2018, has not wanted to authorize a fund holding Bitcoin, because it’s an unregulated asset with a high potential for fraud and manipulation.
In 2021, the SEC approved the launch of the bitcoin futures ETFs. The first one being the ProShares Bitcoin Strategy ETF (BITO).
The problem with futures-based ETFs is they don’t track the actual price of the commodity they follow. Rather they are priced based on the forward-month contract. Then when they expire the futures need to be rolled over into newer futures, adding additional costs to the investor.
The turnaround started in 2022 when Grayscale Investments sued the SEC for rejecting their application for turning the Grayscale Bitcoin Trust (GBTC), a private closed trust that held Bitcoin, into a spot bitcoin ETF. GBTC started investing in Bitcoin around 2013.
In August 2023, The U.S. Court of Appeals for the District of Columbia ruled that the SEC failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP, in a document called the Grayscale Order. The court vacated the Grayscale Order and remanded the matter back to the SEC. Despite reservations, the SEC gave up the fight and decided to start the process for bringing spot Bitcoin ETFs to the market.
Grayscale said Friday morning that GBTC began trading at 4:00 a.m., during the pre-market session, making GBTC the first spot Bitcoin ETF to trade in the U. S. GBTC was the most actively traded Bitcoin ETF yesterday, with a total of $2.32 billion in value on NYSE Arca. GBTC was the most actively traded commodity ETF across U.S. markets, and the 9th-most actively traded ETF in the entire U.S. marketplace.
Grayscale said it was “highly liquid, maintaining a 6 basis points (2 cent) average bid-ask spread throughout the day. Trading activity indicated a wide base and variety of investors, from individuals to institutions.”
Since the 11 funds launched Thursday are holding the same asset, one of the big differentiators will be the fees investors are charged.
· On Friday, Franklin Bitcoin ETF (EZBC) revised its expense ratio to 0.19% from 0.29%, making it the fund with the lowest fee. On top of that, Franklin Templeton has waived fees until August 2, 2024 or up to $10 billion in assets under management.
· EZBC moved ahead of the previous fund with the lowest expense ratio. That was Bitwise Bitcoin Trust (BITB), charging 0.20% (currently 0.00% with fee waiver.
· ARK 21Shares Bitcoin ETF’s (ARKB) expense ratio is 0.21%, but currently 0.00% with fee waiver
· Fidelity Wise Origin Bitcoin Trust (FBTC) charges 0.25%, but it is also currently 0.00% with fee waiver.
· WisdomTree Bitcoin Trust (BTCW) charges 0.30% (currently 0.00% with fee waiver)
· Invesco Galaxy Bitcoin ETF (BTCO) has an expense ratio of 0.39% (currently 0.00% with fee waiver)
· Valkyrie Bitcoin ETF (BRRR) charges 0.49% (currently 0.00% with fee waiver)
· Blackrock’s iShares Bitcoin Trust (IBIT) expense ratio is 0.25%, even with a fee waiver it currently charges 0.12%.
· VanEck Bitcoin Trust (HODL) has an expense ratio of 0.25%
· The Hashdex Bitcoin ETF (DEFI) is an outlier with an expense ratio of 0.90%
· And Grayscale Bitcoin Trust (GBTC) tops the list with an expense ratio coming in at 1.50%
Updated with Grayscale trading info at 12 p.m., chart with assets and volume and new expense ratio for EZBC at 3:30 p.m.
Read the full article here
