The Arrival of GBTC: A Deep Dive into the World of Spot Bitcoin ETFs
The U.S. Securities and Exchange Commission’s recent approval of ETFs directly investing in bitcoin marked a pivotal moment on Jan. 10. Swiftly, on Jan. 11, the market introduced eight new products, with the Grayscale Bitcoin Trust (GBTC) holding approximately $24 billion in assets at $37.07 per share on Jan. 19. GBTC, trading over 37 million shares daily, imposes a 1.50% management fee.
Among the seven alternative Bitcoin ETFs are
- Bitwise Bitcoin ETF (BITB)
- Fidelity Wise Origin Bitcoin Fund (FBTC)
- Franklin Bitcoin ETF (EZBC)
- Invesco Galaxy Bitcoin ETF (BTCO)
- Valkyrie Bitcoin Fund (BRRR)
- VanEck Bitcoin Trust (HODL)
- WisdomTree Bitcoin Fund (BTCW)
While varying in expense ratios, GBTC stands out as the most liquid, providing crucial tight bid-offer spreads and correlation to volatile bitcoin prices.
Comparing GBTC and Bitcoin’s day-to-day percentage changes from Jan. 12 to Jan. 18 reveals nuanced trends. Bitcoin and GBTC experienced varied fluctuations, underscoring the distinction in their trading hours.
Despite recent pullbacks, Bitcoin maintains a bullish trend since finding a bottom in November 2022. The cryptocurrency has consistently formed higher lows and highs through 2023 into early 2024. The SEC’s approval of spot bitcoin ETFs triggered a “buy the rumor, sell the fact” response, indicating market participants’ cautious approach.
Support for Bitcoin
SEC Chairman Gary Gensler’s approval lacked full-throated support for bitcoin. Highlighting risks associated with bitcoin, he distinguished it as a speculative and volatile asset, with applications in illicit activities. Drawing parallels to SPDR Gold Trust (GLD), some view bitcoin as the new gold, with GBTC modeled after GLD’s success since 2004.
The SEC’s approval, however, offers a degree of validation, making bitcoin-related assets more acceptable in standard equity accounts. Gensler’s cautionary message emphasizes the need for careful consideration, given the substantial risks associated with cryptocurrencies. As the future remains uncertain, the balance between detractors and supporters in this volatile asset class underscores the importance of prudent investment practices.
