Crypto ETFs Attract Record Cash amid Regulatory Crisis in the US

<p>BlackRock's
application to establish a Bitcoin (BTC) <a href="https://www.financemagnates.com/terms/e/exchange-traded-fund-etf/">exchange-traded fund (ETF</a>) has ignited
a new fever in the digital asset market. There are strong indications that Wall
Street giants are trying to claim a piece of the cryptocurrency pie for
themselves following the United States' crackdown on 'unregulated' exchanges
like <a href="https://www.financemagnates.com/cryptocurrency/after-binance-sec-sues-coinbase-over-illegal-operation-of-crypto-exchange/" target="_blank" rel="follow">Binance and Coinbase</a>.</p><p>Bitcoin Spot Market
Remains Calm, ETFs in the Lead</p><p>Evidence of
investors once again favoring ETFs includes the largest influx into ProShares'
BITO Bitcoin ETF in a year, which last week totaled $65.3 million. On Friday, the fund traded 500 million shares, something that has only happened
five times in the past.</p><p> BITO is the first Bitcoin-related ETF launched
in the US, which tracks its movements in the futures market. It's also the most
popular among large institutional investors. The sudden surge in popularity of
cryptocurrency ETFs coincides with a drop in activity on decentralized
exchanges like Coinbase and Binance.</p><p>The calm in
the Bitcoin cash market and inflows into the ETF market suggest a shift in investors'
behavior. According to the analytical firm Kaiko, the depth of the cryptocurrency market is currently very 'thin'. Since the start of
the year, the crypto market has dropped by 20% and is evidently lacking retail
investors. Daily trading volume for BTC is $24 billion, which is a quarter of its volume from 2021 when Bitcoin was testing historical highs.</p><p>The lack of
activity can be partly attributed to the long-term consolidation of Bitcoin
prices, which beat the $30,000 level last week. The price lingered below this
psychological threshold for over a year, dropping to lows, such as $15,000 in
November 2022.</p><p>Adding to
this is the tightening regulatory loop in the US and the Securities and
Exchange Commission's (SEC) effort to classify an increasing number of
cryptocurrency assets as securities. This temporary 'reluctance' to invest in the
unregulated space seems understandable.</p><p>However,
institutional players are taking advantage of this, once again opting for ETFs.</p><blockquote><p lang="en" dir="ltr">The Bitcoin Futures ETF <a href="https://twitter.com/search?q=%24BITO&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$BITO</a> had its biggest weekly inflow in a year as assets top $1b again. It also traded half a billion in shares on Friday, which it's only done about 5 times before via <a href="https://twitter.com/SirYappityyapp?ref_src=twsrc%5Etfw">@SirYappityyapp</a><a href="https://t.co/Xrq0lUaaTO">pic.twitter.com/Xrq0lUaaTO</a></p>— Eric Balchunas (@EricBalchunas) <a href="https://twitter.com/EricBalchunas/status/1673106982365003782?ref_src=twsrc%5Etfw">June 25, 2023</a></blockquote><p>BlackRock Proposes an ETF,
Others Follow</p><p>BlackRock,
the world's largest asset manager, submitted an application on June 16 <a href="https://www.financemagnates.com/cryptocurrency/blackrock-seeks-approval-for-a-spot-bitcoin-etf-in-the-us/" target="_blank" rel="follow">to
create a spot Bitcoin ETF</a>, sparking a wave of similar applications over the
past few days. According to the official filing, BlackRock will use the CME CF
Bitcoin Reference Rate to track Bitcoin prices. CF Benchmarks, a subsidiary of the cryptocurrency exchange Kraken, collects price data from renowned
cryptocurrency exchanges worldwide.</p><p>Last week,
<a href="https://www.financemagnates.com/cryptocurrency/invesco-and-wisdomtree-join-blackrock-in-pursuit-of-spot-bitcoin-etf-approval/" target="_blank" rel="follow">Invesco and WisdomTree</a>, two large ETF issuers, made similar moves. Although both
entities' applications to create comparable instruments were rejected in the
past, the industry hopes that this time may be different. The SEC, which is
openly at war with decentralized exchanges, might look more favorably on
proposals from regulated entities.</p><p>This is the
<a href="https://www.financemagnates.com/cryptocurrency/news/invesco-seeks-secs-approval-for-bitcoin-strategy-etf/" target="_blank" rel="follow">first application</a> for a spot Bitcoin ETF since 2021 for Invesco. <a href="https://www.financemagnates.com/cryptocurrency/news/wisdomtree-seeks-approval-for-a-us-bitcoin-etf/" target="_blank" rel="follow">WisdomTree
also filed a similar application</a> at the time, which was ultimately rejected at
the end of 2022.</p><p>ProShares' BITO Bitcoin
ETF Gains Momentum</p><p>ProShares'
BITO Bitcoin ETF continues to gain momentum. The BITO fund, a recent
beneficiary of the growing popularity of crypto ETFs on Wall Street, has gained
almost 60% since the beginning of the year. As noted by Eric Balchunas, the
Senior ETF Analyst for Bloomberg, BITO almost perfectly tracks the spot price
of Bitcoin, lagging only 1.05% on a yearly basis.</p><blockquote data-conversation="none"><p lang="en" dir="ltr">Interesting thing re <a href="https://twitter.com/search?q=%24BITO&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$BITO</a>, even tho it got trashed by some bc futures roll costs yada yada, it pretty much has tracked bitcoin perfectly. It's lagged spot by 1.05% ann, but it's fee is 0.95% = only 10bps of roll (extra) costs, which is rounding error. Many predicted &gt;5% a yr. <a href="https://t.co/5TnQpRA3Ii">pic.twitter.com/5TnQpRA3Ii</a></p>— Eric Balchunas (@EricBalchunas) <a href="https://twitter.com/EricBalchunas/status/1673108671994183681?ref_src=twsrc%5Etfw">June 25, 2023</a></blockquote><p>"Main
drivers of last week’s rally appear to have been several institutional news
developments such as the BlackRock attempt to launch a bitcoin ETF. There are
however some underlying developments in the bitcoin market that might be giving
support to positive price movements," Simon Peters, the Market Analyst at eToro, commented.</p><p>BITO prices
have yet to catch up to the peak spot prices of <a href="https://www.financemagnates.com/terms/b/bitcoin/">Bitcoin</a> and are slightly below
this year's highs.</p><p>However, if the influx of funds maintains its current high
level and more companies submit applications to establish crypto ETFs,
overcoming the high of $18.36 in 2023 on the BITO chart seems to be only a matter of
time.</p><blockquote><p lang="en" dir="ltr">UPDATE: <a href="https://twitter.com/DigitalAssets?ref_src=twsrc%5Etfw">@DigitalAssets</a> and <a href="https://twitter.com/Fidelity?ref_src=twsrc%5Etfw">@Fidelity</a> is about to make a seismic move in crypto via both <a href="https://twitter.com/search?q=%24BTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$BTC</a> and <a href="https://twitter.com/search?q=%24ETH&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$ETH</a>. Sources expect Fidelity to either make a bid for <a href="https://twitter.com/Grayscale?ref_src=twsrc%5Etfw">@Grayscale</a> or quickly launch their own spot <a href="https://twitter.com/hashtag/bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#bitcoin</a> ETF. One or both are coming, soon. **Blackrock and Fidelity will own…</p>— Andrew (@AP_Abacus) <a href="https://twitter.com/AP_Abacus/status/1670455968608538624?ref_src=twsrc%5Etfw">June 18, 2023</a></blockquote><p>Especially since the market is still anticipating a move from Fidelity and Grayscale.</p>

This article was written by Damian Chmiel at www.financemagnates.com.