A wave of optimism regarding potential United States regulatory adjustments has significantly bolstered trading volumes within Bitcoin institutional investment vehicles, including Exchange Traded Funds (ETFs). As data from various resources, including Bloomberg, displays a near-record weekly inflow into Bitcoin-related ETF.
The ProShares Bitcoin Strategy ETF (BITO), the pioneer futures-based ETF to receive approval in the U.S. this year, showcased a notable trading volume with $1.7 billion traded last week, marking its second-largest trading week since its inception. This heightened activity places BITO among the top echelons of ETFs, illustrating a growing appetite among investors for Bitcoin exposure, albeit through derivative products.
On the flip side, the Grayscale Bitcoin Trust (GBTC), a stalwart in the institutional Bitcoin investment realm, also witnessed a significant uptick in trading activity. With $800 million in volume last week, GBTC’s discount to the Bitcoin spot price narrowed to a two-year low.
Notable: $BITO traded $1.7b last week, 2nd biggest week since its wild WEEK ONE. $GBTC did $800m. That’s $2.5b (top 1% among ETFs) into two less desirable methods (vs spot) for exposure = while we think spot ETFs unlikely to set records on DAY ONE, clearly there’s an audience pic.twitter.com/6bFYtE0UoR
— Eric Balchunas (@EricBalchunas) October 28, 2023
Analysts speculate that this narrowing discount is a positive signal, possibly indicating a maturing market or an anticipation of favorable regulatory shifts. The discount rate now stands at a mere 13.1% below the BTC spot price, the lowest since November 2021.
William Clemente, a co-founder of crypto research firm Reflexivity, echoed the sentiment of a reinvigorated market by describing the ETF trading activity as “back in full steam.” This resurgence in demand for institutional investment options is not confined to BITO and GBTC alone, but extends to other players in the market, reflecting a broader trend of growing institutional interest in Bitcoin and its derivative products.
Legal victories along the path to potentially convert GBTC into a spot ETF have further fueled this momentum. The Grayscale product now trades with an implied share price much closer to the BTC spot price, hinting at a remarkable comeback even before Bitcoin’s recent price uptick of 15% last week.
Despite the upbeat market dynamics, investment management firm ARK Invest has trimmed its GBTC holdings in sync with the share price gains, albeit GBTC now represents a 10.24% share of its ARK Next Generation Internet ETF, marking the first alteration since November 2022.
