Answer "yes" to this email if you want me to write a newsletter on how to choose an exchange and self-custody your crypto.

Happy Friday everyone!

The main topic that keeps everyone talking is still the Bitcoin ETFs. The ETFs have been around for a week now. So let's dissect what has happened over the last week.

Let's start with a confession. This is how I felt when the Bitcoin ETFs were approved.

Yes, based on the predictions of capital inflows, I expected fairly immediate upward pressure on the price. That, well, didn't happen. Bitcoin briefly spiked to around US$49000 before a sell-off began that sent Bitcoin plummeting to US$42000-43000. For the rest of the week, Bitcoin has been hovering around that level.

So, I hate to say it, but even though the approval of the 11 Bitcoin ETFs in the US was a watershed moment, the price has been a bit disappointing. 🫤 

Why is that?

Record trading volume

On the first day of trading, Bitcoin ETFs broke a record. They traded US$4.6 billion across all 11 issuers, making it the biggest day-one splash any ETF has ever made.

Even after three days, the trading volume was still impressive, reaching nearly US$10 billion. To put this in perspective, in 2023, 500 ETFs were launched in the US. On Wednesday of this week, they had a combined trading volume of US$450 million. So, compared to the entire ETF class of '23, the trading volume of the Bitcoin ETFs is leading by orders of magnitude.

Then why hasn't the price gone up?

But a bleeding at Grayscale

First of all, let's remember that the Bitcoin ETFs only saw the light of day because of Grayscale. The crypto asset manager wanted to convert its flagship Bitcoin Trust (GBTC) into an ETF, but the Securities and Exchange Commission (SEC) refused. Grayscale took the case to court, and the rest is history.

The court ruled in favor of Grayscale, stating that the SEC's reasoning was "arbitrary and capricious". As a result, the SEC was forced to approve 11 Bitcoin ETF applications in a batch process.

But.

While GBTC was for many years one of the few ways sophisticated investors (aka not you and me) could invest in Bitcoin, it was far from ideal. Investors had to tie up their capital for long periods and pay high management fees. Luckily for them, the trust was trading at a discount to its underlying asset, Bitcoin.

So when the trust was finally converted into an ETF, many investors had plenty of reasons to cash in. As a result, GBTC has seen very large outflows.

If you subtract the outflows at Grayscale, the net inflows into the newly approved Bitcoin ETFs were around US$900 million after three days.

Not in the billions, but not bad ey. 👏 

What it means for Australia

None of the 11 Bitcoin ETFs are yet available in Australia. However, it's only a matter of time before you can buy them Down Under, as the reputation of the issuers (Blackrock, Fidelity, etc.) gives local brokers comfort. So expect Bitcoin ETFs to appear on local ETF trading platforms in the coming months.

In addition, Australian providers are also racing to launch their products. The Australian Financial Review recently reported that the Australian Securities Exchange (ASX) may list a Bitcoin ETF from asset manager Monochrome in the first half of 2024. DigitalX has also applied, while Betashares is preparing a similar product.

However, keep in mind that the next halving will occur in April which has historically been a catalyst for Bitcoin. So there may be some upside to capture before the Bitcoin ETFs are available in Australia.

Remember, you can always buy Bitcoin on a secure crypto exchange and then self-custody it in a cold wallet. (Not financial advice.)

Answer "yes" to this email if you want me to write a newsletter on how to choose an exchange and self-custody your crypto.

Thank you all. Have a great weekend!

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