Have US-Based Bitcoin ETFs Performed to the Expectation?

What are Bitcoin ETFs?

The recent round of crypto ETF approvals from the US SEC (Securities and Exchange Commission) has been given to ‘spot’ Bitcoin ETFs, not to be confused with futures Bitcoin ETFs that have existed for longer, and clearly haven’t had as immense an impact on the price of Bitcoin.

Let’s clarify both types of crypto ETFs.

Spot Bitcoin ETFs track the real-time price of Bitcoin, and purchase a specific amount of Bitcoin to sell as shares. What this means is that the fund holds an equivalent amount of bitcoins for every share it sells, so it is directly backed by the crypto itself. When users buy Bitcoin ETF shares, they are actually gaining direct exposure to the asset itself. This is a revolutionary concept, especially in the US, where crypto has yet to receive regulatory clarity.

On the other hand, futures Bitcoin ETFs have existed in the US and other parts of the world for some time now. They track Bitcoin-based futures contracts, which means investors essentially get to bet on the future price of the asset and there is no direct exposure involved. 

History of Bitcoin ETFs in the US

Time for a look back at the fascinating past of spot Bitcoin ETFs! Long story short, the road has been thorny to say the least.

• The exchange-traded fund is a popular instrument in the traditional financial space, and quite a few with excellent foresight had the idea to apply the same to Bitcoin once its prices started a sustained rally (that caught eyes) for the first time. The call for a Bitcoin ETF emerged from retail and institutional investors around the world too, who did not yet have a widely accepted way to invest in Bitcoin or other crypto.
• The first Bitcoin ETF application to drop at the SEC’s door was from the Winklevoss twins (you know them as the people behind Gemini) in 2013. However, the SEC hasn’t been known to take kindly to crypto and relevant instruments, on the grounds that the lack of centralised supervision can make them an easy weapon for illegal activities. So they rejected this idea.
• 2013 also saw Grayscale launching Bitcoin Investment Trust.
• 2016, 17, 18, and 19 went by in rapid flashes, containing no progress: the SEC said nope to adjusted applications for a Bitcoin ETF from the Winklevoss twins as crypto markets were still immature in their view, and then the regulator found they do not have enough control on crypto exchanges. Grayscale filed and withdrew an appeal to convert its Trust into a spot Bitcoin ETF. 
• 2020 had something new to offer: Grayscale converted its Trust into an SEC-reporting entity. Thus came the first ever publicly traded Bitcoin fund in the US.
• The line of rejections has been long, but what finally went right? In 2021, the first Bitcoin ETF to come to the US was the Proshares Bitcoin Strategy ETF or BITO, one based primarily on Bitcoin futures. This rejuvenated pleas for a spot Bitcoin ETF too.
• Meanwhile, in 2021 Canada saw its first spot Bitcoin ETF.
• 2022 saw another string of rejections on spot Bitcoin ETF filings from the SEC: from firms like SkyBridge, Fidelity, Bitwise, and Grayscale. The situation was definitely not helped by the FTX fiasco, which shook crypto’s credibility to the core and the space had to build its standing in the eyes of investors from the scratch up again, earning their trust and promoting increased decentralisation in the process.
• Not deterred in the slightest, big names in the US financial world went up to the SEC with their spot Bitcoin ETF applications again in 2023, amending them on the way as per the SEC’s demands. Grayscale even took the SEC to court, challenging its rejection of their BTC spot ETF application; the firm received a positive outcome. 
• The SEC seemingly took note of the turning tides, and all efforts bore fruit, when on January 10, 2024, the SEC’s crypto ETF approval came through. Let’s take a look at the names:
  1.   ARK 21Shares Bitcoin ETF (NYSE:ARKB)
  2.   Bitwise Bitcoin ETF (NYSE:BITB)
  3.   Blackrock iShares Bitcoin Trust (NASDAQ:IBIT)
  4.   Franklin Bitcoin ETF (NYSE:EZBC)
  5.   Fidelity Wise Origin Bitcoin Trust (NYSE:FBTC)
  6.   Grayscale Bitcoin Trust (NYSE:GBTC)
  7.   Hashdex Bitcoin ETF (NYSEARCA:DEFI)
  8.   Invesco Galaxy Bitcoin ETF (NYSE:BTCO)
  9.   VanEck Bitcoin Trust (NYSE:HODL)
  10.   Valkyrie Bitcoin Fund (NASDAQ:BRRR)
  11.   WisdomTree Bitcoin Fund (NYSE:BTCW)
• The happy ending is very likely going to be followed by a happily ever after: the US has inspired other jurisdictions and nations to endorse their own spot crypto ETFs. Hong Kong, with its crypto positive regulations, has already started receiving spot Bitcoin ETF applications. Notably, they already have Bitcoin futures ETFs. 

Why are Bitcoin ETFs a big step to mainstream adoption of crypto?

This statement has already proven its truth to a large extent: Bitcoin’s price performance is eye-catching, hitting a new all-time high even before the 2024 Bitcoin halving. As history would suggest, Bitcoin prices have always reached new all-time highs roughly one and half year after halvings. The chart below would signify the same- after 2012, 2016, and 2020 halvings, you can see how Bitcoin prices have hiked significantly.

This time however, US Bitcoin ETFs overshadowed the excitement usually reserved for halving. So is the power of Bitcoin ETFs that they propelled Bitcoin to over $70,000 all by themselves, and the general bullish statement sustains even as Bitcoin does backs and forths in the above $60,000 range. 

In fact, optimistic predictions suggest Bitcoin may receive a further push by the upcoming halving and finally cross the $100,000 mark. 

How have US Bitcoin ETFs performed in the two months since they were launched?

Yep, it’s been a little over two months since they began trading. It’s been one record after another for them. The BlackRock crypto ETF IBIT in particular is unstoppable: it had reached $2 billion in assets under management (AUM) before January was over, and as of the end of March 2024, IBIT has crossed $17 billion in AUM. All of the US Bitcoin ETFs together hold 4.017% of the total 21 million BTC supply (amounting to 843,513 BTC) as of the end of March. 

Notably, MicroStrategy, a famous institutional investor in Bitcoin, currently owns around 214,246 bitcoins. The BlackRock crypto ETF IBIT has overtaken this number for over 254,403 BTC. The Grayscale Bitcoin Trust has around 333,619 bitcoins (coming first among the US Bitcoin ETFs in terms of BTC holdings), and Fidelity’s FBTC has around 145,338bitcoins. 

The overall verdict is that spot Bitcoin ETFs in the US have broken past even the most optimistic of predictions. Their performance makes one beyond excited about the future: Bitcoin’s growth from here on out would be an incredible sight, especially as the asset matures with more traditional individual and institutional investors pouring in. 

Bitcoin ETF: Mudrex brings US spot crypto ETFs to India

Finally, for those wondering about Bitcoin ETF in India, there’s good news. Y-Combinator backed crypto investment platform Mudrex now has plans to offer US-based crypto ETFs to Indian investors. This first phase would list Bitcoin ETFs from BlackRock, Fidelity, Franklin Templeton and Vanguard.

Which way does the wind blow, now? Certainly in the favour of crypto, now that the people have spoken. The popularity of spot Bitcoin ETFs in the US is immense, and the excitement will catch on around the world sooner or later. Comprehensive regulation may very well be on the way.

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