As spot Bitcoin ETFs begin trading, here’s what you need to know
Uma Devi
THE first spot Bitcoin exchange-traded funds (ETFs) – including BlackRock’s iShares Bitcoin Trust and the Grayscale Bitcoin Trust – debuted on stock exchanges in the United States overnight.
Trading volume exceeded US$4.6 billion on Jan 11 (Thursday), the first day of trading, Reuters reported. The wire service added that funds from Grayscale, BlackRock and Fidelity dominated trading. The Business Times answers some questions about these new market products:
What are spot Bitcoin ETFs?
These are funds holding Bitcoin that trade on exchanges just like stocks. Previous cryptocurrency ETFs held only Bitcoin futures, which is why Bitcoin enthusiasts are so keen on the spot Bitcoin ETFs.
What are the spot Bitcoin ETFs out there?
A total of 11 ETFs have been granted approval:
Who can buy or sell these ETFs?
The ETFs are available to trade on brokerages, just as any other US-listed stocks or ETFs are.
Not all brokerages in the US have said they will offer these ETFs, though.
BT’s checks found that at least some of these ETFs are available via the following brokerages: FSMOne, Interactive Brokers, Moomoo and Phillip Securities.
What are the risks?
Gerald Wong, founder and chief executive of investment advisory platform Beansprout, said investors should note that the underlying asset of a spot Bitcoin ETF is a cryptocurrency.
He noted that the Monetary Authority of Singapore, for one, has repeatedly warned that trading cryptocurrencies is “highly risky and not suitable for the general public”.
“Investors should take into consideration the heightened risks of the spot Bitcoin ETF, costs such as the ETF expense ratio and trading commissions, among other factors, when deciding whether to invest in the spot Bitcoin ETF,” Wong added.
Manuel Villegas, a digital-asset analyst at Julius Baer, warned that price wars could emerge as asset managers attempt to capture market share in a competitive industry.
Volatility is also unlikely to subside in the near-term, he said.
While he acknowledged that Bitcoin’s fundamentals are “very sound” due to factors such as long-term holder accumulation and slowing miner supply growth, he reckons Bitcoin will correct at some point, given its recent rally.
