By: Andres Rincon
Jan. 24, 2024 - 4 minutes
After a very successful year in 2023, the ETF industry has already exhibited a notable start to the year. The long-awaited approval of spot Bitcoin ETFs finally came to the U.S. on January 10, 2024. Although the approval was expected, it is still considered a historic moment for both U.S. ETFs and crypto assets given the impact and the attention behind it.
The First Days of the U.S. Spot Bitcoin ETFs
Crypto assets had a strong start in 2024 with the Bitcoin price climbing to over U$47K. The key driver of this price surge was the expectation that the SEC would approve spot Bitcoin ETFs for trading on the U.S. market. The very next day after SEC's approval, a total of eleven Bitcoin ETFs rushed to the market to jump into the Bitcoin asset-gathering race. The U.S. spot Bitcoin ETF market quickly became six times the size of the existing Canadian spot Bitcoin ETF market. However, this was not because of massive inflows on their first trading days — these were somewhat underwhelming — but because of the existing Grayscale Bitcoin Trust converting to an ETF.
Nevertheless, even if the outflows from the Grayscale Bitcoin Trust were to be excluded, the total inflows over the first two days would have still been moderate at U$1.4B. Although U.S. spot Bitcoin ETFs saw over U$831M in inflows over the first two days of trading, this number is arguably underwhelming considering the overall size of the U.S. ETF market and the hype preceding this launch.
The Impact of the Canadian Crypto ETF Market
Before the U.S. spot Bitcoin ETF could walk, the Canadian Spot Bitcoin ETF had to learn how to walk and run. The smooth launch of Bitcoin ETFs in Canada established a successful model for the U.S. ETF market. Although not intentional, the approval of only one spot Bitcoin ETF on the first day by the OSC in Canada gave a significant advantage to that fund. The OSC learned from this experience, and in the case of spot Ether ETFs, approved three Canadian ETFs all at once.
The SEC also seems to have taken note from the OSC's experience and chose to approve eleven ETFs all at once in hopes of not favouring a single issuer based on when they first filed. The Canadian experience was also first to prove that the ETF wrapper was suitable for crypto and gave investors easy access to crypto assets in a regulated environment. With the SEC's nod, investors could become more confident about pumping money into crypto ETFs and crypto assets.
While the approval of spot Bitcoin ETFs in the U.S. might benefit the crypto industry, the implications for Canadian crypto ETFs may be muted. Given the size of the American market, investors — especially international investors — may switch to U.S. ETFs for crypto investment. Canadian crypto ETFs may see a mix of inflows and outflows, especially as global asset manager giants enter the market.
Fees – An Early Differentiator
Canada experienced a spot Bitcoin ETF fee war immediately after the first ETFs were launched. The U.S. took a page from this playbook and amped it up. With all eleven spot Bitcoin ETFs launching on the same day, almost all holding the same asset and using similar indices, the easiest way to stand out was to cut fees or waive them. As a result, issuers started a fee war even before the ETFs launched. Many issuers chose to also waive or discount their fees for the first few months or until reaching a certain AUM. Others permanently launched with very low fees.
Future Innovation and a Word of Caution
The SEC's go-ahead stamp could give further legitimacy to the crypto industry. Most notably, it will allow many U.S. retail investors to tap into the crypto market through the over U$7.5TN ETF market in the U.S. However, important to note, this approval came with a cautionary statement from SEC Chair Gensler highlighting that the ruling of the U.S. Court of Appeals for the District of Columbia against the SEC was one of the main reasons for the SEC to approve Bitcoin ETFs.
Chair Gensler's statement also reiterated that "While the SEC approved the listing and trading of certain spot Bitcoin ETP shares, the SEC did not approve or endorse Bitcoin. Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto."
Andres Rincon spoke on MoneyTalk Live about the importance of the SEC's approval and how the diversity of the new U.S. Bitcoin ETFs may provide access for more investors. Our Head of ETF Sales and Strategy goes into detail explaining spot Bitcoin ETFs and why "fee wars" driving management pricing down should lead to a lot of trading in the first six months. Watch the full interview as Andres Rincon offers his insight on spot Bitcoin ETFs in the U.S.
The views or opinions expressed herein represent the personal views of the writer and do not necessarily reflect the views of TD Securities or its affiliates.
This material is intended to provide commentary on the market for commodities discussed herein.
Not Advice: The information contained in this material is for informational purposes only and is not intended to provide professional, investment or any other type of advice or recommendation, or to create a fiduciary relationship. Neither TD Securities (USA) LLC (“TD Securities USA”) nor any of its affiliates (collectively, “TD”) makes any representation or warranty, express or implied, regarding the accuracy, reliability, completeness, appropriateness or sufficiency for any purpose of any information included in this material. Certain information may have been provided by third-party sources and, while believed to be reliable, has not been independently verified by TD, and its accuracy or completeness acannot be guaranteed. You should not make an investment decision in reliance on this material, which is intended to provide only brief comments on the topics addressed, and is based on information that is likely to change without notice.
Not Securities or Derivatives Research: This material has not been produced, reviewed or approved by TD’s securities or derivatives research departments. The views of the author may differ from others at TD, including TD securities or derivatives research analysts.
Not Independent: The views expressed in this material may not be independent of the interests of TD. TD may engage in conflicting activities, including principal trading before or after posting this material, or other services involving commodities discussed in this material, or related financial products. TD may have a financial interest in the commodities discussed in this material, including, without limitation, a financial product that references such commodities.
Not An Offer or Solicitation: Nothing contained in this material is, or should be construed as, an offer, a solicitation of an offer or an invitation to buy or sell any commodity, or any financial product that references such commodity, and it is not intended for distribution in any jurisdiction where such distribution would be contrary to law.
Risk of Loss. Transactions in commodities, and financial instruments that reference commodities, involve risk of loss, and are subject to the risks of fluctuating prices. You should weigh potential benefits against the risks. Past performance is no indicator of future performance and the Materials are not intended to forecast or predict future events.
Andres Rincon
Managing Director and Head of ETF Sales and Strategy, TD Securities
Andres Rincon
Managing Director and Head of ETF Sales and Strategy, TD Securities
Andres Rincon
Managing Director and Head of ETF Sales and Strategy, TD Securities
Andres Rincon heads ETF sales and strategy at TD Securities. His ETF team advises both institutional and wealth investors on the ETF landscape and strategies, publishes a broad array of ETF publications, and works with TD's ETF market making team in facilitating ETF orders. Andres joined TD Securities in 2008, first managing credit risk for the dealer, and later as a member of the Equity Derivatives division. He later took on the task of expanding TD Securities' ETF sales and strategy platform. He is also a Chartered Market Technician (CMT).
Canada
Cryptocurrency
ETF
SEC
Technology
U.S.
Related Content
-
BlackRock’s Pulse on Global Investment Trends
-
What makes the Canadian market unique for ETF investors?
-
Bitcoin ETFs: A Look Back at a Historic Launch
back to top Top
