The Year in Crypto: Bitcoin and Ethereum ETFs Bring More Investors Into Crypto

It may seem like ages ago in a fast-paced crypto industry, but the launch of spot ETFs for Bitcoin and Ethereum this year January And Julyrespectively, heralded a seismic shift for the crypto industry.

Spot Bitcoin ETFs have attracted mountains of money and allowed investors to gain exposure to BTC without the hassle of managing private keys. They have also lent legitimacy to Wall Street assets. Meanwhile, spot Ethereum ETFs validated the asset’s legal status. And despite a subdued debut, they have gained momentum in recent weeks may have opened the door for similar products Solana and XRP in the US

When Bitcoin ETFs started trading in January, the price of BTC clocked in at $46,000. Nearly a year later, the asset’s price has more than doubled. It has even been broken $108,000 in Decemberafter momentum fueled by Donald Trump’s victory in the White House.

As a group, eleven spot Bitcoin ETFs now have $113 billion in assets under management, or AUM, according to MintGlass. Bloomberg ETF analyst Eric Balchunas had said this Declutter early December that the number of Bitcoins held by these products could overtake the estimate 1.1 million Bitcoins mined by Bitcoin’s enigmatic creator, Satoshi Nakamoto, near Christmas.

Turns out the symbolic milestone was to smithereens just two days later.

“It would be a fitting ending for a storybook launch,” Balchunas said at the time. “This stuff is an anomaly in physics. There has never been a launch like this before, and there never will be another.”

When it comes to spotting Bitcoin ETFs, the products brought “excitement, anticipation, opportunity, [and] legitimacy” to the property, Balchunas added. Removing all the friction that comes with gaining exposure to Bitcoin, he said the power of matching investors with brands they know and trust in brokerage accounts cannot be overstated.

It is a clear departure from the common refrain of “Not your keys, not your coins,” following the collapse of FTX in 2022 – i.e. the belief of many crypto die-hards that self-management is the only reasonable way to own crypto. By 2024, the value proposition of Bitcoin exposure without key management was too good to pass up for some investors.

Nathan Geraci, president of investment advisor The ETF Store, said Declutter that he was always very optimistic about the prospects of Bitcoin ETFs. At the beginning of the year he has predicted that the group would “destroy every ETF launch record” before they started trending. However, he added, “net inflows into these products have exceeded even my extremely optimistic expectations.”

BlackRock enters the chat

With more than $53.5 billion in assets under management, BlackRock’s iShares Bitcoin Trust ETF (IBIT) has become the market leader this year. IBIT’s profile towered over Grayscale’s Bitcoin Trust (GBTC), the second-largest Bitcoin ETF by AUM at $20 billion, and was boosted by BlackRock CEO Larry Fink, who highlighted Bitcoin as an investment. several time this year.

Once a Bitcoin skeptic, the CEO of the world’s largest asset manager described Bitcoin in January as ‘potential long-term store of value’ against governments devaluing their currencies. Months later, Fink called himself a ‘great believer” in Bitcoin, portraying the asset as an investment for people with an increasingly fearful view of the world.

In terms of stores of value, Bitcoin proponents often compare Bitcoin to “digital gold.” Within BlackRock’s product suite, that link crystallized in November, when IBIT’s AUM surpassed that of BlackRock’s iShares Gold ETF (IAU) – first offered in 2005.

At the time of writing, it ranks 32nd among all U.S. ETFs by assets under management, according to the ETF database.

While analysts noted Unpleasant Declutter that BlackRock’s move into the crypto space has eroded the industry’s stigma in 2023, Geraci said the stellar performance of spot Bitcoin ETFs was anything but a given.

“I’m not sure anyone in January envisioned the Bitcoin ETF category eclipsing $100 billion in assets before the end of the year,” he said. “In fact, there were plenty of naysayers who thought the category would never achieve that goal.”

Another market

Spot Bitcoin ETFs generated huge amounts of inflows this year, but they also improved Bitcoin’s market structure, according to research from analytics firm Kaiko.

In June Kaiko observed that the adoption of spot Bitcoin ETFs had increased Bitcoin trading volumes on crypto exchanges while strengthening the market’s ability to absorb large orders. At the same time, Kaiko analysts noted that Bitcoin trading activity has been concentrated around weekdays, when Wall Street is open for business.

After giving himself a ‘crypto presidentDuring the campaign, Trump’s re-election led to a record increase in the price of Bitcoin. When it came to BlackRock’s Bitcoin product, IBIT acted as a connective tissue that allowed investors to trade Bitcoin in an unprecedented way.

Like Bitcoin jumped past $75,000 on November 6 – the day after Trump’s re-election – IBIT’s trading volume exceeded $1 billion in 20 minutes. By the end of the day, IBIT’s trading volume had risen to $4.1 billion.

“For context, that’s more volume than stocks like Berkshire, Netflix or Visa saw today,” Balchunas said wrote on X (formerly known as Twitter).

In an interview, Balchunas noted that spot Bitcoin ETFs have broken record after record this year, from trading volume metrics to initial pace of inflows. Remarkably, BlackRock’s Bitcoin ETF reached $10 billion in assets under management faster than any ETF ever launched in history. It was also the first ETF with $50 billion in assets under management – ​​more than five times faster than any other ETF in history.

Then the SEC approved the listing and trading of options for spot Bitcoin ETFs in October, analysts said Declutter the development would make it easier, cheaper and safer for institutional players to gain Bitcoin exposure.

“I see this primarily as another brick in the wall of normalization,” said Bitwise CIO Matt Hougan Declutter. “We can be happy with that.”

The gap of shades of gray

It would be impossible to document the launch of spot Bitcoin ETFs without mentioning Grayscale. It was once the largest asset manager in the crypto space, and its legal victory against the SEC last year cleared the way for final approval of the products.

The SEC waited a decade to approve applications for spot Bitcoin ETFs, citing concerns about it manipulation of the market. But the U.S. Court of Appeals for the D.C. Circuit ruled last August that the SEC’s repeated denial of Grayscale’s ETF gambit was unlawful.

While billions of dollars flowed out of the GBTC this year — $21 billion at the time of writing — then-Grayscale CEO Michael Sonnenshein said the outflows were expected. In April he has be to the bankrupt estates of collapsed crypto companies, which were “forced” to liquidate GBTC holdings, among traders who profited from GBTCs one-time discount because of the previous structure.

Analysts too attributed GTBC also flows to the product’s expense ratio, which is 1.5%. Making the product more expensive to hold than GBTC’s competitors, with expense ratios as low as 0.19%, Grayscale responded with a GBTC spin-off ETF with an expense ratio of 0.15%.

A similar dynamic affected the Grayscale Ethereum Trust (ETHE), which saw more than $1 billion in outflows in its first three days of trading as a full-fledged ETF. MintGlass. Although the bleeding has largely stopped and Grayscale also launched a spin-off ETF for ETHE, the outflow dampened investor enthusiasm when spot Ethereum ETFs launched this summer.

Ethereum and beyond

Because SEC Chairman Gary Gensler had questions avoided Regarding Ethereum’s regulatory status, many doubted that applications for spot Ethereum ETFs would be approved under his leadership. In one stunning developmentHowever, the SEC gave the products the green light in May.

A lawsuit filed by Ethereum software company Consensys had also alleged that the SEC viewed internally ETH as security. (Disclosure: Consensys is one of 22 investors in Declutter.) The distinction would have forced ETF hopefuls to take a different path, but the SEC’s action effectively cemented Ethereum’s status as a commodity.

Yet spot Ethereum ETFs have seen much lower inflows than spot Bitcoin ETFs. Pressured by $3.6 billion in ETHE outflows, the group of products from eight issuers has attracted $2.3 billion in inflows since their debut in July, according to MintGlass.

Meanwhile, ETFs haven’t been a salve for Ethereum’s price the way similar products were for BTC. After peaking around $4,100 earlier in December, the cryptocurrency is currently trading up about $3,400. And unlike Bitcoin, Ethereum didn’t break or come close to its all-time high in 2024.

It makes sense that investors haven’t flocked to Ethereum ETFs given the story of Ethereum relatively unknown compared to Bitcoin in the minds of mainstream investors, said David Lawant, head of research at FlaconX Declutter.

The story of Bitcoin as a store of value is well established, Lawant said. But regardless of whether Ethereum is presented as a technology play, a smart contract platform, or an app store for Web3 applications, the story around Ethereum is not that well established outside of crypto circles.

“Ethereum is a different beast” compared to Bitcoin, Lawant said. “There are different ways you can spin it, but no matter how you tell the story, it’s a different story.”

Currently, Bitcoin and Ethereum are the only digital assets with spot ETFs in the United States. Still, amid hopes for a crypto-friendly SEC during the Trump administration, asset managers have filed for coverage by ETFs Solana, XRPAnd Litecoinamong a growing list of other digital assets. Even Dogecoin ETFs don’t seem that far-fetched in this environment, analysts say Declutter.

Whether or not applications for these cryptocurrencies are approved may be a question for Gensler’s future successor. Paul Atkinsa former SEC commissioner and Trump’s nominee for the role. Meanwhile, spot Bitcoin and Ethereum ETFs will trade with their first year setting a high bar to shoot for.

Edited by Stacy Elliott