First Bitcoin ETF Assets Under Management Near $600 Million, Grayscale Seems Less Appealing

After experiencing a single-day plummet of $10,000 - the largest correction since the beginning of the year - BTC rebounded on February 24th, even briefly surpassing the $50,000 mark. Fundamentally, Federal Reserve Chair Powell's "dovish" remarks on Tuesday, suggesting that the end of easy monetary policy is still far off, boosted overall investor sentiment to some extent.

Although the cryptocurrency market experienced a significant decline earlier in the week, it did not seem to affect the fund inflows into the world's first approved Bitcoin ETF product, Purpose Bitcoin ETF (ticker BTCC). According to data from blockchain analytics firm Glassnode, on February 22nd alone, the fund added 2,251 BTC, and the rapid fund inflow trend continued over the next two days. Currently, Purpose Bitcoin ETF holds 9,647 BTC .

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This Bitcoin ETF, which has been listed for only 6 days, had reached $594 million in Assets Under Management as of February 24th. Bloomberg analyst Eric Balchunas predicts that by this weekend, the ETF's Assets may reach $1 billion.

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Looking back at the spectacular launch, Purpose Bitcoin ETF was undoubtedly enthusiastically embraced by the market. TMX.COM data shows that BTCC generated $80 million in trading volume in the first hour of trading, with total first-day trading volume reaching $165 million and total trading volume exceeding 9.65 million shares, making it rank among the top 10 by trading volume of all instruments on the Toronto Stock Exchange that day.

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Bloomberg Intelligence analyst James Seyffart noted that while it's unclear how much fund inflow BTCC can attract, its trading volume is already significantly higher than that of typical Canadian ETFs on their first day of listing.

In addition to Purpose Bitcoin ETF, Evolve Funds Group also obtained approval from the Ontario Securities Commission (OSC) to issue a Bitcoin ETF. Evolve Bitcoin ETF has two trading codes, "EBIT" and "EBIT.U", and began trading on the Toronto Stock Exchange on February 19th.

Canadian Compliant ETFs Move in on America's "Cheese"

The consecutive approval of two Bitcoin ETFs has rapidly made Canada a hotbed for global Bitcoin ETFs. Renowned quantitative trader and cryptocurrency investor Lex Moskovski even tweeted that Canada is drinking America's "milkshake."

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Indeed, the U.S. Securities and Exchange Commission (SEC) has rejected domestic ETF applications for seven consecutive years, citing market immaturity, the possibility of Bitcoin being subject to market manipulation, and the lack of suitable custody mechanisms. Given the seven-year history of failed Bitcoin ETF applications in the U.S., Canada's approval of the world's first compliant Bitcoin ETF is undoubtedly exciting news for the cryptocurrency market.

Rumors suggest that the SEC was surprised by Canada being the "first mover," and this may help push the U.S. to approve a Bitcoin ETF, as positive development of the Canadian ETF could alleviate the SEC's concerns.

As an open-ended fund pegged to the Bitcoin price, the successful approval of a Bitcoin ETF means that any user with a compliant stock account can obtain returns equivalent to investing in Bitcoin without actually buying or selling Bitcoin . While significantly lowering the barrier to trading, it opens the market to traditional retail investors and institutions, which will bring tremendous traffic to the cryptocurrency world. Therefore, as the cryptocurrency market began to take shape, the industry has long viewed the passage of a Bitcoin ETF as a milestone event.

Before the approval of compliant Bitcoin ETFs, Grayscale's BTC Trust in the U.S. was seen as the main channel for traditional funds to enter the cryptocurrency market. When BTC broke through the $1 trillion market cap, Grayscale's total Assets Under Management once exceeded $42 billion, with the BTC Trust accounting for $35 billion, or as much as 82.55%.

The successful launch of Purpose Bitcoin ETF, with nearly $600 million in Assets Under Management in just 6 days, has undoubtedly intensified the competitive environment facing Grayscale's BTC Trust. Arthur Salzer, CEO of Northland Wealth Management, points out that ETFs eliminate some of the disadvantages of existing closed-end funds, such as buying at net asset value rather than at a premium.

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Based on Purpose's official website BTCC.U price of $9.36 on February 24th, with 0.00019013 BTC shares per unit, and BTC's real-time price of $50,088.67, BTCC.U's premium rate was -1.72%.

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In contrast, Grayscale's GBTC price on February 24th was $48.4, with 0.00094726 BTC shares per unit, meaning Grayscale's GBTC premium rate was 2.01%. This means buying BTCC.U is not only cheaper than buying GBTC, but even more cost-effective than buying the equivalent amount of BTC spot directly (of course, this excludes the 1% management fee and audit fees allocated to users - if calculated, it should be close to the price of buying BTC spot).

Furthermore, for the Bitcoin ETF, Purpose Investments charges a 1% management fee, while Grayscale's BTC Trust charges 2%. Additionally, Grayscale does not support redemption - to exit trust shares, holders must hold for at least 6 months, whereas BTCC has no redemption lock-up period and can be traded for cash at any time. It's clear that BTCC provides better liquidity. It's foreseeable that Grayscale "isn't as appealing anymore" is happening.

The issuance of compliant Bitcoin ETFs has significantly lowered the barrier for traditional financial retail investors and institutions to enter the cryptocurrency market. Having a stock account allows indirect holding and trading of BTC , and the cryptocurrency market will clearly see an unimaginable scale of growth.

Of course, in the U.S., investors can also purchase BTC through applications like PayPal and Square. On February 24th, news reported that in Q4 2020, Square sold $1.76 billion worth of Bitcoin to customers through Cash App, accounting for 38.51% of full-year sales, while full-year 2020 sales were $4.57 billion. Square noted in its report that approximately 3 million users bought or sold Bitcoin in 2020, and in January 2021, more than 1 million customers purchased Bitcoin for the first time. January 2021 alone accounted for one-third of full-year 2020 figures, showing that more and more users are flocking to the cryptocurrency market.

Also on February 24th, two major institutions announced increased positions. Square purchased 3,318 BTC for $170 million, and MicroStrategy purchased an additional $1.026 billion (approximately 19,452) Bitcoin, at an average price of approximately $52,765 per coin. As of February 24, 2021, MicroStrategy had acquired 90,531 Bitcoin at a total cost of $2.171 billion, with an average price of approximately $23,985 per coin.

It is foreseeable that traditional financial retail investors and institutions will come to the cryptocurrency market in droves. With the approval and issuance of Canada's Bitcoin ETF, a global Bitcoin ETF race will soon unfold; and the launch of more Bitcoin ETFs will provide more options for traditional funds to enter the cryptocurrency market, thereby boosting the overall market capitalization of Bitcoin and even cryptocurrencies.

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