Early Thoughts on ETFs

We’re entering our third week of trading for the new set of US spot bitcoin ETFs.

Almost a dozen exchange trade funds went live on January 11th. In just their first three days of trading, the funds drew nearly $2 billion. That’s almost twice what bitcoin futures funds did in 2021 or what the SPDR Gold ETF did in 2004. Early numbers are just numbers though.

Some topics I’d like to cover:

• it’ll take time

• fee war

• early winners

• I bought ARKB

• BlackRock at #1

• ETFs vs. real bitcoin

• Gensler, Dimon, others

• price action

It’ll Take Time

First things first—it’s going to take weeks, months, or longer before we really have a feel for how these spot bitcoin ETFs will impact bitcoin more broadly. Something I’m eager to see is just how closely these ETFs track to bitcoin’s performance.

I own BITO, a bitcoin futures ETF.

While BITO makes no guarantee, they say that it “has closely tracked the performance of spot bitcoin” since its inception. Ultimately, these new spot bitcoin ETFs are seeking to do the same thing. Initial inflows and outflows, however, are going to make this “launch period” likely more volatile than six months or a year from now.

ETFs performing closely to the price of bitcoin would be a win. When exactly we can say that’s happening remains to be seen.

Fee War

There’s a war over fees occurring amongst the ETFs that went live. In the investor’s mind, the lower the fee, the better. While Grayscale is on the high end of fees, all others appear to be offering either fee-less intro periods and, in general, lower fees.

Grayscale is able to continue charging a higher fee mainly because their existing investor base from the converted trust product may have to incur capital gains if they sell and move funds elsewhere.

Even still, GBTC has seen heavy volumes of outflows with the launch of the ETFs. GBTC has long been one of the only traditional finance products with bitcoin exposure but now investors have options and many are jumping ship for more familiar or reputable names.

Early Winners