Six Months Since the Approval of Spot Bitcoin ETFs: First Results and Near-Term Prospects

Half a year has passed since the historic approval of spot Bitcoin ETFs, so it’s high time to take a look at first results.

The new product has clearly gained steam. According to the CEO of CryptoQuant, spot Bitcoin ETFs already account for a quarter of Bitcoin trading volume. ETFs have quickly gained their market share and have become significant players in Bitcoin markets.

Assets under management (AUM) of spot Bitcoin ETFs total about $50 billion. At its peak, the AUM of spot Bitcoin ETFs exceeded $60 billion. It should be noted that AUM depends on both clients’ activity (whether they deposit or withdraw money) and fluctuations in Bitcoin price.

Thus, it’s not surprising to see that AUM pulled back from highs as BTC has corrected from the highs that were reached back in March. Importantly, the pullback in crypto markets did not lead to an exodus from ETFs, whose AUM dropped mostly in line with the price of Bitcoin.

The leading ETFs are iShares Bitcoin Trust (a BlackRock fund), Grayscale Bitcoin Trust (a market veteran that was able to convert its fund into a spot ETF when the SEC approved such products), and Fidelity Wise Origin Bitcoin Fund.

These funds control more than 85% of the spot ETF market. High concentration is usual in both traditional and crypto markets. For example, the combined market share of BTC and ETH exceeds 70%. In the U.S. stock market, leading tech firms also have an outsized influence on general market dynamics.

It is already obvious that spot Bitcoin ETFs are a huge success. These products cater to investors who have been unwilling to buy Bitcoin at crypto exchanges or via p2p and open the door for institutional money. At this point, spot Bitcoin ETFs serve as a bridge between traditional finance and crypto.

Currently, the market is waiting for the launch of spot Ether ETFs. The SEC is playing its usual game, asking for more paperwork and disclosures. However, the endgame is clear: spot Ether ETFs would be approved, providing traditional markets’ investors with an opportunity to invest in ETH without moving out of their usual infrastructure.

Hardcore crypto fans would argue that using spot ETFs is not the correct way to invest in crypto, but real life shows that crypto ETFs boost demand for crypto, which benefits all.

Demand for spot crypto ETFs is not limited to BTC and ETH products. Spot SOL ETFs may be coming next. VanEck and 21Shares have already filed paperwork related to the potential launch of SOL ETFs.

Most likely, such ETFs would not be launched this year, as the SEC is not in a hurry to approve crypto-related products. However, the trend is obvious: the number of spot crypto ETFs will continue to grow due to the high demand for such products.

As more products are approved by the SEC, regulatory uncertainty would decline, which would be bullish for crypto markets. The ETFs themselves will boost demand for spot crypto, providing additional support for another bull run.