Just seven weeks after the Securities and Exchange Commission approved the first slate of spot Bitcoin ETFs, adoption of the new investment vehicle is driving crypto prices to levels not seen since late 2021.
On Thursday, BlackRock received a record $612 million into its industry-leading Bitcoin ETF and crossed $10 billion in assets under management, a day after the asset class hit a high of $7.7 billion in trading volume. Volumes reached $4.7 billion yesterday as the frenzy continues to attract investors.
With the price of a single Bitcoin topping $63,000 on Wednesday, the success of the ETFs is driving a spike in demand not seen since the last bull run, when Bitcoin peaked at nearly $70,000 in November 2021.
ETF fever
The U.S. crypto industry has pushed for Bitcoin ETF, which allows investors to trade the cryptocurrency in the form of shares on major exchanges, since 2013, when the Winklevoss twins unsuccessfully sought approval from the SEC.
For over a decade, the regulatory agency opposed myriad applications from leading companies, citing immature crypto markets and the potential for manipulation, even as it approved a Bitcoin futures ETF in 2021. That changed when the digital asset manager Grayscale sued the SEC in 2022, arguing that it was “arbitrary and capricious” that the agency didn’t approve a spot version. Grayscale won the suit in August 2023, paving the way for it to convert its long-standing Bitcoin trust into an ETF—and for other players, including Fidelity and BlackRock, to enter the market.
After a prolonged slump following the November 2022 collapse of FTX, Bitcoin began to creep upward in anticipation of the long-awaited approval, breaking $40,000 in December. After the SEC announcement came in early January, prices dipped back down as Grayscale shareholders began to exit from the newly converted Bitcoin ETF. Bitcoin sunk below $40,000 in late January before rebounding, as Grayscale outflows slowed and money poured into the other options.
With Bitcoin breaking $60,000 on Wednesday, ETFs continue to drive the upward momentum, with the asset class experiencing record inflows. While flows ticked down on Thursday, Bloomberg analyst James Seyffart noted on X that the $4.7 billion of volume would have been a record if not for the previous day's high of $7.7 billion.
Another bullish indicator is the increased adoption of the Bitcoin ETFs among traditional brokers, with investment banks like Morgan Stanley reportedly exploring adding spot Bitcoin ETFs to their platforms.
Even as prices soar, with Bitcoin's explosion buoying other cryptocurrencies, including Ether and Dogecoin, there are possible tailwinds ahead. Grayscale's Bitcoin ETF, which charges a higher fee than other options, continues to experience steep outflows, including $600 million on Thursday.
Analysts from JPMorgan wrote on Wednesday that the upcoming halving, which will reduce the reward received by Bitcoin miners, could drive up the production cost of Bitcoin and lead to a reduction in the number of operating miners. As a result, the analysts predict, the halving event could push Bitcoin's price back down to $42,000.
