Crypto Prices Stabilize as SEC Approval of ETFs Ends Speculation and Reduces Volatility: Fineqia

CryptoNews.com

2024-01-22 18:30:28

Ruholamin Haqshanas

Last updated:

January 22, 2024 01:02 EST | 2 min read

Source: PexelsBitcoin’s price has stabilized, closing the week at around $41,600, experiencing a marginal 0.4% decline compared to the previous week’s closing value of approximately $41,750.

The reduced volatility can be attributed to the recent approval of ETFs by the SEC, putting an end to speculation surrounding this development, according to Matteo Greco, research analyst at Fineqia International.

The introduction of Bitcoin (BTC) Spot ETFs has attracted significant inflows from traditional finance into the digital assets market, Greco said in a note shared with Cryptonews.com.

He said that since their launch, the 11 Spot ETFs have collectively attracted approximately $1.15 billion in cumulative inflows.

“Leading the pack are the Blackrock Spot ETF, boasting about $1.40 billion in assets under management (AUM), closely followed by the Fidelity Spot ETF with approximately $1.26 billion in AUM.”

However, the total inflow of the 11 BTC Spot ETFs was partially offset by the outflows from the Grayscale Bitcoin Trust (GBTC).

GBTC Sees Over $2.8 Billion in Outflows

The analysis revealed that GBTC, which has been trading as a trust since 2015, recently underwent conversion into an ETF.

Following the conversion, the product experienced substantial outflows of about $2.81 billion, reducing the net inflow of the 11 BTC Spot ETFs from $3.96 billion to $1.15 billion.

Before the conversion, GBTC held approximately 620,000 BTC, which has now decreased to around 552,000 BTC.

The outflows from GBTC can primarily be attributed to two factors, Greco said.

Firstly, customers holding GBTC shares were previously restricted from redeeming them and could only sell them on the secondary market due to the product’s structure.

This compelled many customers to hold their positions for an extended period without an exit option, unless they were willing to sell at a significant discount.

Secondly, the higher management fee set by Grayscale (1.5%) compared to most competitors (0.2%/0.3%) led some investors to withdraw their investments from GBTC, either to capitalize on profits or reinvest in more cost-effective ETFs.

The BTC Spot ETFs have witnessed robust activity, characterized by high trading volumes.

In the six days of trading since their launch, the cumulative trading volume of the 11 Spot ETFs amounted to approximately $16.6 billion, averaging around $2.77 billion daily.

As expected, GBTC recorded the highest volume, given the substantial amount of BTC held in custody and the dynamic activity surrounding the Trust’s conversion into an ETF.

ETH Spot ETFs Loom

Following the successful launch of BTC Spot ETFs, market participants, and analysts are now focusing on the potential inclusion of various digital assets in ETFs.

Analysts predict a high likelihood, at over 70%, of Ethereum (ETH) Spot ETFs receiving approval this year.

This expectation is reinforced by the price action of ETH immediately after the approval of BTC Spot ETFs.

Capital shifted from BTC to ETH, resulting in a 17% appreciation of ETH against BTC and an 11% increase in dollar terms during the approval week.

These movements indicate that market participants are banking on the approval of ETH Spot ETFs, following the green light for BTC Spot ETFs, and are adjusting their positions accordingly.

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