Just seven weeks after the Securities and Exchange Commission approved the first slate of spot Bitcoin ETFs, the adoption of the new investment vehicle is driving cryptocurrency prices to levels not seen since late 2021.
On Thursday, BlackRock received a record $612 million in its industry-leading Bitcoin ETF and surpassed $10 billion in assets under management, a day after the asset class’s advent. hit a maximum of $7.7 billion in trading volume. Volumes reached $4.7 billion yesterday as the frenzy continues to attract investors.
With the price of a single Bitcoin topping $63,000 on Wednesday, the success of ETFs is driving a spike in demand not seen since the last bull run, when Bitcoin peaked at nearly $70,000 in November 2021.
ETF fever
The US cryptocurrency industry has been pushing for the Bitcoin ETF, which allows investors to trade the cryptocurrency in the form of shares on major exchanges, since 2013, when the Winklevoss twins unsuccessfully sought SEC approval.
For more than a decade, the regulatory agency has resisted myriad requests from leading firms, citing immature cryptocurrency markets and the potential for manipulation, even as it approved a Bitcoin futures ETF in 2021. That has changed when digital asset manager Grayscale sued the SEC in 2022, claiming it was “arbitrary and capricious” for the agency not to approve a spot version. Grayscale won the case in August 2023, paving the way for the conversion of its long-standing Bitcoin trust fund into an ETF and for other players, including Fidelity and BlackRock, to enter the market.
After a prolonged slump following the collapse of FTX in November 2022, Bitcoin began to rise in anticipation of the long-awaited approval, surpassing $40,000 in December. After the SEC’s announcement in early January, prices fell again as Grayscale shareholders began exiting the newly converted Bitcoin ETF. Bitcoin fell below $40,000 in late January before rebounding as Grayscale outflows slowed and money poured into other options.
With Bitcoin breaking $60,000 on Wednesday, ETFs continue to lead the bullish momentum, with the asset class seeing record inflows. While flows declined on Thursday, Bloomberg Analyst James Seyffart noted on X that the $4.7 billion volume would have been a record if not for the previous day’s high of $7.7 billion.
Another bullish indicator is the growing adoption of Bitcoin ETFs among traditional brokerages, with investment banks like Morgan Stanley reportedly exploring adding Bitcoin spot ETFs to their platforms.
Even as prices rise, with Bitcoin’s explosion supporting other cryptocurrencies, including Ether and Dogecoin, there are possible tailwinds ahead. Grayscale’s Bitcoin ETF, which charges a higher fee than other options, continues to see heavy outflows, Included Thursday 600 million dollars.
JPMorgan analysts wrote on Wednesday that the upcoming halving, which will reduce the reward received by Bitcoin miners, could increase Bitcoin production costs and lead to a reduction in the number of operating miners. As a result, analysts predict that the halving could bring the price of Bitcoin back to $42,000.