It may seem like a long time ago in the fast-paced cryptocurrency industry, but the launch of spot ETFs this year for Bitcoin and Ethereum-in January and Julyrespectively – marking a seismic shift in the cryptocurrency industry.

Spot Bitcoin ETFs have attracted large amounts of cash and enabled investors to gain exposure to Bitcoin without having to manage private keys. They also legitimized assets on Wall Street. Meanwhile, Ethereum spot ETFs have validated the asset's regulatory status. Despite a poor debut, they did it gained momentum In recent weeks and It will probably open the door To products similar to Solana and XRP In the United States

When Bitcoin ETFs started trading in January, the price of Bitcoin reached $46,000. Nearly a year later, the asset's price has more than doubled. So she was violated $108,000 in Decemberin the wake of the momentum he aroused Donald Trump wins the White House.

As a group, eleven bitcoin ETFs now have $113 billion in assets under management, or AUM, according to Queen Glass. Eric Balchunas, Bloomberg ETF analyst, said: Decryption In early December, the number of Bitcoins held by these products may exceed estimates 1.1 million bitcoins It was mined by Bitcoin's mysterious inventor, Satoshi Nakamoto, by Christmas.

It turns out that the symbolic teacher was It crashed Only two days later.

“That would be a suitable ceiling for launching short stories,” Balchunas said at the time. “These things are anomalies in physics. There has never been a launch like this before, and there will never be another.”

Balchunas added that when it came to Bitcoin exchange-traded funds, the products brought "excitement, anticipation, opportunity (and) legitimacy" to the asset. By removing any friction associated with exposure to Bitcoin, he said the power of matching investors with brands they know and trust in their brokerage accounts cannot be overstated.

It's a marked departure from Common refrain “Not your keys, not your coins,” following the FTX collapse in 2022 — that is, the belief of many crypto fanatics that self-custodialism is the only reasonable way to own cryptocurrencies. By 2024, the value proposition of exposure to Bitcoin without key management was too good for some investors to pass up.

said Nathan Geraci, chief investment advisor at The ETF Shop Decryption That he has always been very optimistic about the prospects of Bitcoin ETFs. At the beginning of the year it is anticipation That the group "will wipe out every ETF launch record out there" before it starts trending. But he added, "Net flows into these products exceeded even my very optimistic expectations."

BlackRock enters the chat

With more than $53.5 billion in assets under management, BlackRock's iShares Bitcoin Trust ETF (IBIT) has emerged as an industry leader this year. Outperforming Grayscale's Bitcoin Trust (GBTC), the second-largest bitcoin spot ETF by assets under management at $20 billion, IBIT's profile was boosted by BlackRock CEO Larry Fink, who highlighted Bitcoin as an investment. numerous times this year.

He was once a Bitcoin skeptic and CEO of the world's largest asset management company described Bitcoin in January as a "potential long-term store of value" against governments devaluing its currency. Months later, Fink called himself "A big believer“In Bitcoin, the asset is framed as an investment for those who have an increasingly fearful view of the world.

In terms of stores of value, Bitcoin advocates often compare Bitcoin to “digital gold.” Within BlackRock's product suite, this connection crystallized in November, when IBIT assets were managed Transgression That of BlackRock's iShares Gold ETF (IAU), which debuted in 2005.

As of this writing, it ranks 32nd among all U.S. ETFs by assets under management, according to ETF database.

While analysts male to Decryption As BlackRock's entry into the cryptocurrency space erodes the industry's stigma in 2023, Geraci said the stellar performance of Bitcoin ETFs was not a given.

“In January, I'm not sure anyone would have imagined that the spot Bitcoin ETF category would surpass $100 billion in assets before the end of the year,” he said. “As a matter of fact, there were a lot of naysayers who thought this category would never reach that level.”

Different market

Spot Bitcoin ETFs have received huge amounts of inflows this year, but they have also improved the structure of the Bitcoin market, according to research by analytics firm Caico.

In June, Kaiku Notice The approval of spot Bitcoin ETFs has led to an increase in Bitcoin trading volumes on cryptocurrency exchanges, while enhancing the market's ability to absorb large orders. Meanwhile, Caico analysts noted that Bitcoin trading activity has become concentrated during weekdays, when Wall Street is open for business.

After describing himself as "Head encoder“During the election campaign, Trump's re-election sparked a record rise in the price of Bitcoin. When it comes to BlackRock's Bitcoin product, IBIT served as a connective tissue that enabled investors to trade Bitcoin in an unprecedented way.

Like Bitcoin It jumped past $75,000 On November 6 - the day after Trump was re-elected - IBIT trading volume exceeded $1 billion in 20 minutes. By the end of the day, IBIT trading volume had swelled to $4.1 billion.

“For context, that's more volume than stocks like Berkshire, Netflix or Visa saw today,” books On X (formerly known as Twitter).

In an interview, Balchunas noted that spot Bitcoin ETFs have broken record after record this year, from trading volume statistics to the initial pace of inflows. It's worth noting that BlackRock's spot Bitcoin ETF has reached $10 billion in assets under management faster than any ETF launched in history. It was also the first ETF to reach $50 billion in assets under management - more than... Five times faster More than any other ETF in history.

When the SEC consent Listing and options trading for spot bitcoin ETFs in October, analysts said Decryption The development would make it easier, cheaper and safer for institutional players to gain exposure to Bitcoin.

“I mostly view this as another brick in the wall of normalization,” said Matt Hogan, IT director at Bitwise. Decryption. "We should be happy about that."

Grayscale glitch

It would be impossible to capture the launch of spot Bitcoin ETFs without mentioning Grayscale. It was once Largest asset manager in the field of cryptocurrencies, and its legal victory against the Securities and Exchange Commission last year I paved the way For final approval of products.

The SEC has delayed approving applications for spot bitcoin ETFs for a decade, citing concerns about... Market manipulation. But the US Court of Appeals for the D.C. Circuit found last August that the SEC's repeated denials of Grayscale's exchange-traded fund maneuvering were unlawful.

While billions of dollars have flowed from GBTC this year — $21 billion, as of this writing — then-Grayscale CEO Michael Sonnenshein said outflows were expected. And in April it is He pointed out To the bankruptcy of collapsed cryptocurrency companies, which were “forced” to liquidate GBTC holdings, among traders who profit from GBTC shares. One time big discount Because of its previous structure.

Analysts too attributed GTBC flows into the product expense ratio as well, which is 1.5%. Make holding more expensive than GBTC competitors, with cost ratios as low as 0.19%, grayscale He responded With the GBTC Spinoff ETF featuring an expense ratio of 0.15%.

A similar dynamic occurred for the Grayscale Ethereum Trust (ETHE), which saw outflows of more than $1 billion during its first three trading days as a fully-fledged ETF, according to Queen Glass. While the bleeding has largely stopped, and Grayscale launched an ETF for ETHE as well, outflows dampened investor enthusiasm when Ethereum ETFs launched this summer.

Ethereum and beyond

Because SEC Chairman Gary Gensler was Transcendental questions Regarding the regulatory status of Ethereum, many doubted that applications for Ethereum spot ETFs would be approved under his leadership. In a Amazing developmentHowever, the SEC gave the green light to the products in May.

A lawsuit filed by Ethereum software company Consensys also alleged that the SEC Viewed internally ETH as collateral. (Disclosure: Consensys is One of 22 investors in Decryption.) This distinction could have forced ETF aspirants to take a different path, but the SEC effectively validated Ethereum's status as a commodity with its move.

However, Ethereum ETFs saw much lower inflows than Bitcoin ETFs. After declining $3.6 billion in outflows from ETHE, the product suite from eight issuers has attracted $2.3 billion worth of inflows since its debut in July, as of this writing, according to Queen Glass.

Meanwhile, ETFs have not been the solution to Ethereum's price that similar products have been to Bitcoin. After peaking at around $4,100 earlier in December, the cryptocurrency is currently trading flat About $3400. Unlike Bitcoin, Ethereum has not broken its all-time high in 2024, nor is it close to doing so.

It makes sense that investors haven't flocked to discover ETFs en masse, given that's the story of Ethereum Relatively unknown It's a comparison to Bitcoin on the minds of mainstream investors, said David Lawant, head of research at FlaconX Decryption.

Lawant said the narrative of Bitcoin as a store of value is well established. But regardless of whether Ethereum is presented as a technology platform, a smart contract platform, or an app store for Web3 applications, the narrative surrounding Ethereum is not established outside of cryptocurrency circles.

“Ethereum is a different beast” compared to Bitcoin, Lawant said. “There are different ways you can spin it, but no matter how you tell the story, it's a different story.”

At present, Bitcoin and Ethereum are the only digital assets with spot ETFs in the United States. However, alongside hopes of a cryptocurrency-friendly SEC during the Trump administration, asset managers have been applying to cover ETFs. Solana, XRPand Litecoinamong a growing list of other digital assets. until Dogecoin ETFs don't seem that far-fetched in this climate; Analysts said Decryption.

Whether or not applications for those cryptocurrencies are approved may be a question for Gensler's scheduled successor, Paul Atkinsa former commissioner of the Securities and Exchange Commission and Trump's nominee for the role. Meanwhile, ETFs will trade in Bitcoin and Ethereum, and follow their first year with a high achievable cap.

Modified by Stacey Elliott