Bitcoin exchange-traded funds are set to start trading as early as Thursday after final registration statements went effective following a months-long approval process with the Securities and Exchange Commission — leaving some to wonder what’s next.
The past few weeks in itself have been eventful leading up to the approvals, but the intrigue doesn’t stop there as experts weigh in on what billions of dollars in flows could look like in the coming days and weeks, if a spot ether ETF is next and if this changes the regulatory landscape for crypto.
Flows over the next few weeks
All eyes will be on the expected inflows within the first 24 to 48 hours, said Anthony Rousseau, head of brokerage solutions at multi-asset trading platform TradeStation, in a statement.
“Projections range from substantial to record-breaking, with some envisioning flows in the multiple billions—an unprecedented feat in the ETF realm,” Rousseau said.
Rousseau also warned of potentially underestimating long-term implications for the bitcoin market. Financial institutions have over $100 trillion in assets under management, and a portion of those funds could be allocated to bitcoin, Rousseau said.
“It’s crucial to recognize that institutions can follow due process and navigate regulatory hoops to incorporate Bitcoin into their investment strategies, a journey that could span several months,” Rousseau said.
Other experts expect some volatility over the next few days. Spot bitcoin ETFs are expected to track the underlying bitcoin, but those ETFs are large and will be having lots of new AUM investment coming in in that first day or two after trading, said Stuart Barton, co-founder at Volatility Shares in an interview.
“It is possible that we might see the ETFs struggle to get the exposure in the bitcoin markets,” Barton said. “We know the bitcoin market might be 10-20 billion dollars a day typically. If 40-50 billion dollars poured into these ETFs on day one, it might be difficult for the advisers to get a hold of that amount of bitcoin.”
Will all the ETFs be ready to launch?
The race for spot bitcoin ETFs has gotten very competitive, with multiple applicants slashing fees over the last few days. BlackRock shrunk its sponsor fee for its spot bitcoin ETF from 0.3% to 0.25%, while Ark Invest/21Shares also cut its fee from 0.25% to 0.21%.
Many of the issuers looking to launch have made the decision to lower fees, which have gotten so low it leaves the question of whether it is still a good business opportunity, Barton said.
Barton said it’s possible that one or two of the spot bitcoin ETFs won’t launch on Thursday, one could launch late, some never launch — or they could all launch.
“If you launch late, it’s just one more thing that might make the decision to not launch at all easier,” Barton said.
Are spot ether ETFs next?
“Once the sugar high from spot bitcoin ETF approval wears off, I expect the focus to quickly shift towards spot ether ETFs,” said Nate Geraci, president of investment advisor The ETF Store.
Big name firms, such as Fidelity and BlackRock, have also applied for a spot Ethereum ETF over the last few months. A month earlier, ether futures ETFs went live, marking the first ever ETFs to launch based on ether futures and two years after the launch of the first bitcoin futures ETF.
Also potentially adding fuel to the proverbial spot crypto ETF fire was a decision made by three judges in a D.C. court over the summer which ruled that the SEC had to re-review Grayscale’s bit for a spot bitcoin ETF after the asset management firm sued the agency last year following the rejection of its plan for the conversion of its flagship GBTC fund.
“That was critical because, combined with Grayscale’s court victory and SEC approval of spot bitcoin ETFs, the agency will now have a difficult time rejecting spot ether ETFs without exposing themself to another lawsuit,” Geraci said.
Stuart Barton, co-founder at Volatility Shares, was also optimistic.
“The fact that they allowed listing of the futures based ETFs is enough to say they are thinking about ether the same way they are thinking about bitcoin and you can infer from that they’re probably thinking it’s not a security and not going to regulate it that way,” Barton said.
SEC’s stance on crypto
SEC Chair Gary Gensler has been critical of crypto and up until Tuesday has been issuing warnings about crypto generally on X.
The SEC’s approval of spot bitcoin ETFs hinges on the Grayscale opinion, said Coy Garrison, partner at Steptoe and former counsel to SEC Commissioner Hester Peirce.
“The judiciary serves a vital role in reminding the SEC that it must operate within the bounds of its statutory authority,” Garrison said. “The SEC’s stance on crypto under Chair Gensler will likely only change when and if required to do so by a court.”
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