Spot Bitcoin ETFs Launch in the U.S. And Become Second-Most Popular Commodity ETFs After Gold
February 1, 2024
Stay up to date with our monthly market commentary:
- Spot Bitcoin ETFs receive SEC approval and start trading in the U.S.
- Bitcoin price drops after bankrupt exchange FTX sells $1 billion in GBTC shares.
- Bitcoin (BTC) is up 2.2%, while Ether (ETH) is up 3.5% versus last month.*
Market Overview - January
The price of Bitcoin (BTC) increased by 2.2% in January, at one point reaching a new yearly high of $48,490 after the new spot Bitcoin ETFs started trading.
Bitcoin continued its impressive run from 2023 into the new year. The biggest news of the month was the spot Bitcoin ETF approvals in the U.S., which took place on January 10th. Trading started the next day.
Within a span of 14 days, the new Bitcoin ETFs surpassed all Silver ETFs as the second most valuable commodities ETFs in the U.S. In total, all ETFs currently hold $27 billion (AUM), with Gold ETFs leading the pack with $111 billion in AUM.
While Bitcoin reached a temporary new yearly high of $48,490, the price dropped by more than 15% within a span of a week. This was due to the high outflows of the GBTC Bitcoin ETF by the Grayscale Bitcoin Trust. A big portion of the shares sold were worth $1 billion by the bankrupt crypto exchange, FTX. The insolvency administrator commented they sold roughly 60% of their GBTC shares.
However, this only caused a temporary price drop as Bitcoin recovered quickly to end the month at $43,570.
Besides Bitcoin, one of the few digital assets that ended the month on a high was Ethereum, with a price increase of 3.5% versus last month. This is likely related to the news of a potential spot Ethereum ETF, which several issuers are currently working on. The SEC already announced delays in their approval process.
Crypto Asset Market Performance Review
The crypto asset markets closed the month a leg lower, with some of the most popular assets dropping by more than 10%.
Bitcoin (BTC) stood its ground, closing 2.2% higher month-on-month, while the second-largest crypto asset by market capitalization, Ethereum (ETH), also managed to end the month slightly in the green, closing 3.5% higher versus the previous month.
Bitcoin’s price increased steadily with the news of the newly available spot Bitcoin ETFs. Their launch on Wall Street was the most successful in 2024 and one of the most impressive in ETF history.
Although we saw phases in which significant outflow took place, mainly of the Grayscale Bitcoin Trust, at the end of the day, more capital was allocated towards the other ETFs, settling new records along the way.
This push and the imminent Bitcoin halving event indicate a strong buy sentiment by investors and, therefore, a price increase.
Ethereum’s strong performance was due to its integration of new layer two solutions into the ecosystem, an inflow of liquidity into the network, new implementations by staking providers, and the excitement for a spot Ethereum ETF in the near future.
Besides Bitcoin and Ethereum, Solana was the only remaining digital asset with a price increase. The emerging Ethereum alternative announced a few protocol changes and new hardware changes. The SOL token finished the month up 1.5%.
Most leading altcoins dropped by around 10%, with some investors suggesting that uncertainty of potential charges against the developers of the projects by the SEC would spike fear and result in further price decreases.
Some of these projects have been involved in lawsuits and ongoing discussions with the SEC for years. Further delays and potential fines would not increase investor trust, resulting in further price decreases.
Bitcoin Tech Update
The main focus for most of the Bitcoin community in January was on building better scaling solutions to combat the still high on-chain fee environment, resulting from increased interest in Bitcoin Ordinals and newly created Bitcoin-native token protocols. These on-chain tokens inevitably increase transaction costs because they increase the dataset for blocks in the Bitcoin blockchain.
Such high fees increased demand for scaling solutions like the Lightning Network and Liquid. Both networks saw an increase in newly created wallets, indicating a shift of Bitcoin users onto these networks to escape high on-chain fees.
One of the most anticipated launches in the community was the Aqua Wallet by JAN3. Their wallet combines the power of Atomic Swaps to be interoperable between the Bitcoin on-chain, Liquid, and Lightning networks.
Institutional Interest in Bitcoin
January was an eventful month for institutional investors, with some of the issuers' approvals of the spot Bitcoin ETFs and major announcements.
Spot Bitcoin ETFs Are Here!
After months of speculation, anticipation, and uncertainty, the spot Bitcoin ETFs were launched on January 10th.
They immediately became a success and thus far have accumulated over $27 billion in assets under management (AUM). The launch did have its surprises, however.
Grayscale’s Bitcoin Trust (GBTC) saw significant outflows when FTX sold 60% of their remaining GBTC shares as part of their insolvency processes. However, at the end of the month, outflows slowed, and investors started allocating their capital towards other Bitcoin ETFs.
Spot Bitcoin ETFs Surpass Silver ETFs as the Second-Biggest Commodity ETFs in the U.S.
The newly launched spot Bitcoin ETFs surpassed silver ETFs in the U.S. and secured their position as the second-largest commodity ETF after gold, measured by assets under management (AUM). Silver is traded across five ETFs with $11.5 billion in assets.
These were overtaken by the Bitcoin ETFs, with more than $27 billion in AUM and still growing despite the selling pressure from GBTC. This development is particularly remarkable given silver's traditional status as a commodity.
The rise of Bitcoin ETFs to second place indicates that Wall Street is very interested in the digital asset, increasing Bitcoin's credibility and recognition as an alternative asset.
Bitcoin on Balance Sheets
Tether, the biggest stablecoin issuer, announced last year that they’ll use a portion of their monthly revenue to purchase Bitcoin and put it on their balance sheet.
As of the end of Q4 2023, the company announced that they bought 8,888 BTC for $380 million, which brings their total to 66,465 BTC.
*Closing price data is from January 30, 2024