The launch of the first spot Bitcoin exchange-traded funds (ETFs) in the US was a landmark event for the cryptocurrency industry. These ETFs provide an easy way for mainstream investors to gain exposure to Bitcoin’s price movements by purchasing shares that track the cryptocurrency. In the lead up to their approval, Bitcoin saw a surge from around $42,000 to nearly $49,000 as anticipation built.
Keypoints
- Bitcoin price surged to nearly $49,000 after spot Bitcoin ETFs were approved, but quickly erased all the gains
- The Coinbase Premium, which indicates buying/selling behavior differences between Coinbase and Binance, turned negative after being positive during the rally
- This suggests some US institutional investors may have sold to take profits after the ETF approval rally
- Bitcoin fell below $44,000 on Friday, with mining stocks also falling over 10%, indicating a “sell the news” reaction
- BlackRock’s spot Bitcoin ETF has outperformed Bitcoin itself so far, down only 8.9% compared to Bitcoin’s 10.2% drop
However, this rally was quickly erased after the ETFs debuted on January 10th. Within a day, Bitcoin had retracted all the way back below $44,000. This “sell the news” type of reaction is not uncommon after major hype-driving events finally occur.
One indicator that provides insight into different platform’s user behavior is the Coinbase Premium. This metric measures the difference between Bitcoin’s price on Coinbase, popular with US institutional investors, and Binance, the largest global crypto exchange. Leading up to the ETF launch, the premium was positive, suggesting higher buying demand on Coinbase. However, it plunged deep into negative territory post-launch.
This flip suggests some institutional traders sold Bitcoin to take profits once the long-awaited ETFs went live. The approval may have already been priced in after the run-up, while fears of the event passing without a selloff could have added downward pressure.
Further evidence of investors taking money off the table could be seen in the over 10% single-day crashes of popular Bitcoin mining stocks like Marathon Digital and Hut 8. Even Coinbase stock itself fell 6%, underperforming Bitcoin on the day. This indicates declining appetite for crypto assets across public markets.
However, amidst the turnover, one of the newly launched spot ETFs has quietly outperformed Bitcoin itself thus far. BlackRock’s iShares Bitcoin Trust ETF (IBIT) has lost only 8.9% compared to Bitcoin’s 10.2% drop from their respective Thursday opening prices.
Demand for IBIT shares could be outpacing other ETFs and Bitcoin itself thanks to the power of the BlackRock brand name. The world’s largest asset manager brings institutional credibility, likely enticing inflows from investors who previously shied away from crypto’s volatility but trust in the fund manager’s reputation.
As analysts evaluate these spot ETFs’ tracking ability and stability during times of market stress, small outperformance like IBIT’s could hint at which funds end up dominating inflows going forward. However, the ultimate determinant may simply be provider brand recognition and trust for more conservative investors rather than minute price deviations.
The long-awaited launch of Bitcoin spot ETFs quickly gave way to a “sell-the-news” price reversal just one day later. Outflows from US institutional investors, like those using Coinbase, likely added momentum for Bitcoin dropping nearly 12% from its local peak. In the aftermath,
BlackRock’s fund has quietly held up strongest so far, cushioning losses for its shareholders. Still, analyst commentary continues cautioning additional price declines could be in store if history rhymes with prior landmark crypto events.
