Last week, VanEck’s Spot Bitcoin ETF surprised some market observers as daily activity exploded and the fledgling investment product recorded more than $400 million in trading volume. This represents an increase of more than 1,400% compared to the second most active ETF in the Exchange-Trade Fund. afternoon.
VanEck’s ETF, HODL, which had $25.5 million in volume on its launch last month, had consistently reported daily volume of less than $10 million before its $400 million surge on February 20th. Throughout last week, HODL recorded net inflows of $17 million, according to CoinShares.
So what was generating hundreds of millions of dollars in trading volume if the ETF only added $17 million over the course of a week?
“We’ve noticed that several ETFs have experienced this in Europe as well,” James Butterfill, head of research at CoinShares, told The Block. “We suspect there are some quant funds running high-frequency intraday trading. “I do,” he added. Frequency trading, but what is commonly used is futures.”
VanEck’s spot Bitcoin ETF trading volume. Image: Block Study.
It’s difficult to know ‘who or why is buying ETFs’.
In high-frequency trading, investment banks, hedge funds and institutional investors use computers that use algorithms to execute very large numbers of trades at very high speeds.
VanEck did not immediately respond to a request for comment. But last week, Ed Lopez, the investment manager’s head of product management, told The Block: “Because ETFs are traded on the secondary market, it can be difficult to know if someone is buying an ETF and why.”
Spot Bitcoin ETFs have reported nearly $52 billion in cumulative trading volume since they began trading last month, according to Yahoo Finance data compiled by The Block. Overall, the product has netted $5.8 billion since launch, according to CoinShares.
VanEck’s HODL Spot Bitcoin ETF wasn’t the only new product to experience erratic trading last week. WisdomTree’s product, BTCW, also saw a sharp increase in daily activity, with daily trading volume surging to $223 million on February 20. The previous record for exchange-traded funds was $33.1 million on Feb. 1, according to Yahoo Finance data compiled by The Block.
The day after the volume surge for VanEck and WisdomTree products, they returned to trading levels consistent with their previous performance. On February 21, VanEck and WisdomTree spot Bitcoin ETFs recorded trading volumes of $17.4 million and $7.3 million, respectively, according to Yahoo Finance data compiled by The Block.
“holding and BTCW Volumes are back to normal today,” said Eric Balchunas, senior ETF analyst at Bloomberg. Posted in February 21st. “It was one of those hard days to remember and now it’s over. It gives credence to the ‘algo-testing’ theory or some kind of BT ETF/exchange versus some kind of retail buying frenzy.”
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