🥱 Why is the Bitcoin price flat after spot Bitcoin ETFs

The US SEC approved the spot Bitcoin ETF last week on 11th January amid the biggest anti-climax in history. The SEC wrongly tweeted on 10th January that the ETFs were approved, then immediately deleted the tweet 🤡. After that, SEC Chair Gary Gensler tweeted that the SEC's X account was compromised; the next day, the SEC approved 11 spot Bitcoin ETFs.

A spot Bitcoin ETF is a historic moment for Bitcoin. Bitcoin is no longer a teenager. It has matured into a young adult 👨‍💼.

Since the approval, the price has remained flat. It briefly crossed $48,500 and is currently range-bound at $42-43k, the same price as before the approval.

Many people are wondering why there has been no run-up in the price as expected.

Before I explain this, below are some facts about the Bitcoin ETF launch.

• The Bitcoin ETF's first-day trading volume was $4.6 billion, with trading volumes of $10 billion in the 1st three days.
• The total launch volume outpaced the total launch volume by 3x for all 500 ETFs launched in 2023.

• The top ETFs by trading volume on day 1 are:
  • Grayscale GBTC with around $2 billion
  • Blackrock's iShares Bitcoin Trust IBIT at $1 billion
  • Fidelity's Wise Origin Bitcoin fund FBTC at $700 million
• Together, these three accounted for almost 90% of the volume.

The price has remained flat because there has been an outflow of funds from GBTC. GBTC has seen net outflows of $1.2 billion in the 1st three days.

GBTC was an existing closed-end fund and was converted into a spot Bitcoin ETF. GBTC could not create or redeem shares based on market demand as a closed-end fund. This structure contributed to the premium or discount related to the Net Asset Value (NAV) represented by the underlying Bitcoin. The discount on NAV reached 40% in Jan of 2023 and was still around 20% in October 2023. Due to the fund's structure, investors who would otherwise want to sell were locked into the fund due to the discount as they were waiting for the fund to convert into an ETF.

So Grayscale is going through a correction phase with existing investors, who can finally sell their investment in GBTC at NAV.

GBTC is contributing to sell-side pressure.

Now, let's discuss the buying demand.

Inflows in all the spot Bitcoin ETFs in the 1st three days have been $2 billion. After adjusting for outflows of GBTC and an existing futures Bitcoin ETF, BITO, the net total inflows are $782 million.

The inflows are not higher because the Bitcoin ETFs have just been listed.

• Investors and financial institutions need time to formulate and execute their buying strategies.
• It takes a few days to a week for the ETFs to get listed on various brokerage accounts.
• Some financial institutions' internal processes do not allow them to invest in less than six months old ETFs due to risk management policies.

The listing of the spot Bitcoin ETFs is the beginning. The demand will not be an overnight phenomenon. The impact of spot Bitcoin ETFs on Bitcoin's market will play out over this year.