The launch of the first Bitcoin exchange-traded fund (ETF) in the United States was a landmark event for the cryptocurrency industry. These ETFs provide an easy way for mainstream investors to gain exposure to Bitcoin price fluctuations by purchasing stocks that track the cryptocurrency. Ahead of the approval, Bitcoin surged from around $42,000 to nearly $49,000 as expectations grew.
key point
- After the spot Bitcoin ETF was approved, the price of Bitcoin surged to nearly $49,000, but quickly erased all the gains.
- Coinbase Premium, which measures the difference in buying/selling behavior between Coinbase and Binance, turned negative after being positive during the rally.
- This suggests that some U.S. institutional investors may have sold to take profits following the ETF approval rally.
- Bitcoin fell below $44,000 on Friday and mining stocks fell more than 10%, signaling a “sell the news” response.
- BlackRock’s Spot Bitcoin ETF outperformed Bitcoin itself, falling only 8.9% compared to Bitcoin’s 10.2% decline.
However, that rally quickly fizzled out after the ETF was launched on January 10th. Within a day, Bitcoin fell back below $44,000. This “selling the news” type of reaction is common after a major hype event occurs.
One indicator that provides insight into user behavior across different platforms is Coinbase Premium. This indicator measures the difference between the price of Bitcoin on Coinbase, popular among US institutional investors, and the price on Binance, the world’s largest cryptocurrency exchange. Premiums were positive ahead of the ETF’s launch, indicating strong buying demand for Coinbase. However, it fell deep into negative territory after launch.
This reversal suggests that some institutional traders have profited by selling Bitcoin following the launch of the long-awaited ETF. Approval may already be priced in after preparation and fears that the event will pass without selling may put downward pressure.
Further evidence that investors have taken money off the table can be seen in the daily slump of more than 10% in popular Bitcoin mining stocks such as Marathon Digital and Hut 8. Even Coinbase stock itself fell 6%, underperforming Bitcoin on the day. This indicates a declining appetite for cryptocurrency assets across public markets.
However, amid rising sales, one of the newly launched spot ETFs has so far quietly surpassed Bitcoin itself. BlackRock’s iShares Bitcoin Trust ETF (IBIT) is down just 8.9% compared to Bitcoin’s 10.2% decline since Thursday’s opening price.
The power of the BlackRock brand name could allow demand for IBIT shares to surpass that of other ETFs and even Bitcoin itself. The world’s largest asset manager is likely to offer institutional credibility, attracting an influx of investors who previously avoided the volatility of cryptocurrencies but trusted the fund manager’s reputation.
As analysts evaluate the tracking ability and stability of these spot ETFs during times of market stress, small outperformance like IBIT can hint at which funds will dominate inflows going forward. However, the ultimate deciding factor may be supplier brand awareness and more conservative investor confidence rather than subtle price variations.
The long-awaited launch of a Bitcoin spot ETF quickly turned into a “sell the news” price reversal in just one day. Outflows from U.S. institutional investors, such as those using Coinbase, appear to have added momentum to Bitcoin’s nearly 12% decline from local highs. In the aftermath,
BlackRock’s fund has quietly remained the strongest so far, cushioning losses for shareholders. Nonetheless, analyst commentary continues to warn that there could be further price declines if history matches previous landmark cryptocurrency events.