Carbono Insights #93 | Baby steps for bitcoin spot ETFs
Noteworthy news and data from the initial steps of the 11 ETFs approved by the SEC
Before we start writing Chapter 2 of the history of post-spot bitcoin ETF crypto, we must give Chapter 1 a proper ending. For the last few days, we have been looking at the ETFs like parents look at their first baby: checking every inch, recording every breath, laughing at every sneeze. But, like with babies, everybody knows that this is a lifelong adventure. The best is yet to come as the ETFs grow into mature financial products, well raised to fit in our society.
But while this happens, let’s indulge in the information binge of the last days and highlight the most exciting or entertaining aspects of this pivotal moment.
First movers
Grayscale can claim they were the first to launch a spot BTC ETF. It seems fair since they were true trailblazers with their GBTC product, and their legal win over the SEC paved the way for the approval of the other 10.
Grayscale was the first, but Franklin Templeton earned the medal for the cheapest. The last days before the ETF were a competition to win the price race. As we mentioned in the previous issue of Carbono Insights, three elements will determine the success of an ETF: brand power, distribution, and price. The brand takes years to build, and distribution is just starting.
This first-mover advantage might have impacted the ETFs’ baby steps. Here’s the inflows in the first 30 minutes after the launch.
The size of inflows
The neverending question is, “How much BTC will these funds buy?”. This will determine the heights BTC reaches (and the size of our bags). Blockworks has created this tracker that will allow us to track inflows live.
Some people pointed out that the numbers would have to include outflows from GBTC to reflect reality. Many investors probably decided to exit GBTC now that the gates were finally open. Even taking this into account, the opening days have been a success. Here’s Eric Balchunas, ETF analyst and one of recent months’ most popular crypto-twitter personalities.
The winner is…Ethereum
The star of the show in the recent ETF approval saga? (drumroll) None other than Ethereum. The Bitcoin (BTC) maneuver had already been anticipated and acted upon by most investors who now offset the incoming investments in BTC with some well-timed sales in a strategic move.
Investors seem to agree that the wise move to do now is look at Ethereum (ETH), the proverbial dark horse in this race. With the imminent Dencun upgrade on the horizon, promising to make Layer 2s incredibly cost-effective, and the eagerly awaited ETH ETF set with a firm May deadline, ETH is claiming the spotlight. Throughout its history, Ethereum has consistently played the role of BTC’s beta play, and the script is unfolding once again.
Larry Fink loves tokenization
We’ll reiterate: ETF success hinges on brand, distribution, and price. Larry Fink, BlackRock’s CEO, is enhancing the former factor through a press tour where he praises cryptocurrencies in conjunction with BlackRock’s application for an ETH ETF spot.
Fink also seized this opportunity to reiterate his fondness for tokenization, which appears to be his preferred outcome. “These are just stepping stones towards tokenization. I truly believe that this is the direction we’re headed; we have the technology to tokenize today.”
His grasp of the subject matter and reasoning is commendable (something unimaginable before 2023), although occasionally flawed.
We’ll leave you with Noelle Acheson (follow her!) and her explanation of where Fink might be missing the mark.
We love you anyway, Larry.
Warren and Gensler yell at cloud
In his statements following the approval of the ETF, Gary Gensler went off script to express his dissatisfaction with the measure he had himself voted in favor of. “Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast, Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity, including ransomware, money laundering, sanction evasion, and terrorist financing.”
Gensler seemed to be speaking on behalf of his boss, Elizabeth Warren, a vocal opponent of crypto. Surprisingly, Warren indicated that the decision to approve the ETFs was “wrong on the law.”
Gensler’s misplaced assertion and Warren’s surprising statements suggesting that a legal process is not legal continue to highlight the tension between regulatory bodies and the cryptocurrency industry.
Closing statement: Hester Peirce
For a closing statement, let’s hand the mic to Hester Peirce. Peirce, sometimes called “crypto mom,” has often defended crypto’s position, not because she’s a firm believer in the space (she might be, don’t know, don’t care) but because she feels the SEC has overstepped its boundaries of their mandate by intervening in the natural evolution of crypto. Her dissenting opinion is masterfully entitled “Out, damned spot! Out, I say!” a quote from Macbeth that expresses Lady Macbeth’s intense guilt as she sleepwalks and tries to wash imaginary bloodstains from her hands. The SEC’s resolution has finally ended, but in her opinion, it leaves a stain on the SEC’s credible neutrality, necessary to be a respected authority in financial markets.
Let Hester Peirce drop the mic.
Starting next week, we will be speaking about the post-ETF world. What are the trends where you should look if you want to be up to date with crypto?
