Spot Bitcoin ETFs in the U.S. were hit with a big decline in trading volume on Monday. Some analysts believe this is due to subdued market sentiment and the summer holiday. Despite these lower volumes, BlackRock and Fidelity continue to see net inflows. Meanwhile, Bitwise has expanded into Europe by acquiring ETC Group, while Franklin Templeton is planning to launch a new crypto index ETF.
Spot Bitcoin ETF Trading Volume Hits 7-Month Low
U.S. spot Bitcoin exchange-traded funds (ETFs) saw $61.98 million in net inflows on Monday, but only a daily total trade volume of $779.87 million. This makes it the lowest volume since Feb. 6 and the third lowest overall.
Spot Bitcoin ETF data (Source: SoSoValue)
This was also a big decline from the $5.24 billion that was traded on Aug. 6. According to the Head of Insights at SOFA.org, Augustine Fan, the lower trading volume aligns with a more subdued market sentiment after recent sell-offs. Fan believes that the summer holiday period and diminishing recession concerns have led investors to adopt a wait-and-see approach ahead of the Federal Reserve's Jackson Hole meeting later this week.
On Monday, BlackRock's IBIT fund saw net inflows of $92.68 million, while Fidelity’s FBTC added $3.87 million. However, these gains were somewhat offset by net outflows of $25.72 million from Bitwise’s spot Bitcoin fund and $8.84 million from Invesco’s BTCO.
In the spot Ethereum ETF market, funds reported their lowest daily trade volume since their debut, at approximately $124 million. The nine spot Ether funds saw $13.52 million in net outflows, led by a $20.30 million outflow from Grayscale ETHE. Meanwhile, Grayscale’s Ethereum mini trust recorded net inflows of $4.92 million, and Bitwise’s ETHW fund added $1.87 million.
Ethereum ETF flow (Source: Farside Investors)
Fan explained that traditional finance is still a bit cautious with ETH ETF purchases because of uncertainty surrounding staking legalities and recent issues with Solana ETFs. This carefulness is certainly warranted considering the fact that the U.S. Securities and Exchange Commission (SEC) recently discussed potential concerns about Solana’s status as a security with prospective ETF issuers. This led to Cboe BZX removing Solana ETF 19b-4 filings.
Despite these concerns, Bitcoin’s price was still able to climb by more than 3% in the past 24 hours to $60,943.55. ETH’s price also climbed by about 1.74% throughout the past day, which has resulted in the altcoin trading hands at $2.663.97.
Bitcoin ETFs Attracted Big Buyers in Q2
In the second quarter of 2024, asset managers Goldman Sachs, Capula Management, and Avenir Tech were the largest buyers of Bitcoin ETFs, according to an analysis by CoinShares Research. The analysis is based on quarterly 13F disclosures from large fund managers, which revealed that the three firms collectively bought almost $1.3 billion worth of BTC ETF shares.
Largest bitcoin ETF position changes for Q2 (Source: X)
Since their launch in January, Bitcoin ETFs have seen a lot of demand, driven in part by the adoption of these financial products by major institutions like Morgan Stanley. Dave LaValle, Grayscale’s global head of ETFs, is very impressed by this demand, and pointed out that Bitcoin ETFs have seen over $15 billion in inflows. That is more than three times the largest one-year inflow of any ETF in history.
According to CoinShares, Capula Management bought approximately $470 million worth of BTC shares since March. Goldman Sachs and Avenir Tech purchased $419 million and $388 million, respectively. Additionally, fund managers Galacia Asset Management and DE Shaw bought $307 million and $174 million worth of shares, respectively.
Almost half of Avenir’s holdings now consist of BTC funds. However, the largest outflows were recorded by crypto-native hedge fund Digital Currency Group, which sold $732 million in shares since March.
CoinShares data indicated that hedge funds currently hold the largest portfolio allocations of Bitcoin, averaging 2.2%. Private equity firms also have big allocations, averaging around 1.4%. Adoption among banks and pension funds are still minimal, with allocations of 0% and 0.1%, respectively.
Bitcoin data by investor type (Source: X)
However, ongoing adoption by established wealth managers is expected to lead to larger allocations to cryptocurrency ETFs over time, even among more conservative institutions like pension funds. Katalin Tischhauser, head of investment research at crypto bank Sygnum, firmly believes that large investors, including sovereign wealth funds and pension funds, are preparing to invest in ETFs, and crypto will eventually be integrated into model portfolios.
Bitwise Acquires ETC Group
Other companies are also looking for ways to get their piece of the ETF pie. Asset manager Bitwise has decided to expand into the European market through the acquisition of crypto investment firm ETC Group. Although the financial terms of the deal have not been made public, the acquisition was announced on Aug. 19 and brings over $1 billion in assets under management (AUM) to Bitwise.
ETC Group is based in London, and manages a range of physical crypto exchange-traded products (ETPs), including Bitcoin ETP (BTCE), Ethereum with staking (ET32), Solana (ESOL), XRP (GXRP), and the MSCI Digital Assets Select 20 (DA20). Overall, the acquisition adds nine European-listed crypto ETPs to Bitwise's portfolio and raises its total AUM to more than $4.5 billion.
Since its launch in 2020, the ETC Group introduced various crypto ETPs on the Deutsche Börse Xetra, with regulatory approval from Germany’s Federal Financial Supervisory Authority, BaFin. The firm also offers a blockchain equity ETF providing exposure to blockchain-based companies in Europe.
In the United States, Bitwise is among the asset managers behind the recently approved spot Bitcoin ETFs. In January, the SEC approved 11 asset manager applications, including Bitwise’s Bitcoin ETF (BITB), which holds close to $2.27 billion in net assets. Additionally, Bitwise received approval in July to launch a spot Ether ETP, the Bitwise Ethereum ETF (ETHW), which has accumulated more than $300 million in assets in its first few weeks.
Franklin Templeton Eyes Crypto Index ETF Launch
Meanwhile, Franklin Templeton is planning to launch a new ETF that is designed to offer a comprehensive crypto portfolio. The Franklin Crypto Index ETF will track the performance of the CF Institutional Digital Asset Index, which currently includes only Bitcoin and Ethereum. The fund will invest in digital assets in proportions that mirror the underlying index and may incorporate additional cryptocurrencies in the future.
Screenshot of Franklin Templeton’s fining with the SEC (Source: SEC)
The Franklin Crypto Index ETF will compete with the Hashdex Nasdaq Crypto Index ETF, which was the first of its kind to seek regulatory approval. According to Katalin Tischhauser, index ETFs are a logical next step, similar to how investors use ETFs to buy the S&P 500, but noted that current crypto index ETFs are limited to Bitcoin and Ethereum.
Grayscale, the largest crypto fund issuer with $25 billion in assets under management, has also expressed interest in entering the crypto index ETF space. Dave LaValle hinted at future developments in single-asset and index-based products.
Before the Franklin Crypto Index ETF can be traded on exchanges, the SEC has to approve its registration application, known as an S-1, and allow at least one public equities exchange, like Nasdaq, to list the product.
