Though inflows have cooled, volumes across bitcoin ETFs have continued to rise.
Growing volume for US BTC ETFs doesn’t necessarily mean reduced revenue overall for crypto exchanges.
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Posted April 17, 2024 at 5:36 pm EST.
Though cumulative inflows into spot US bitcoin ETFs have started to slow, trading volumes in the nascent instruments have begun to rival — or eclipse — spot bitcoin transactions on centralized exchanges.
For instance, iShare’s Bitcoin Trust, toward the end of Wednesday’s trading session in New York had booked a daily trading volume of 52.2 million shares, totaling about $1.8 billion, according to data from CoinGlass and Nasdaq. Coinbase, meanwhile, had facilitated dollar transactions of spot bitcoins adding up to about $1.3 billion over the past 24 hours.
Weighing spot bitcoin trading against spot bitcoin ETF trading isn’t a perfect comparison, considering pricing and liquidity differences between the two assets and notional numbers that come into play.
But the bump in bitcoin ETF volumes, despite inflows dipping downwards this month, may be one indicator of persistent interest. Daily volumes are around $3.5 billion currently, compared to $1 billion in mid-January when the ETFs first launched.
Ed Goh, head of trading for B2C2, a liquidity provider for a number of bitcoin ETFs, told Unchained that “what’s interesting is that the notional volumes being traded … are significant when you compare them to major crypto-native exchanges, as well.”
The Impact on Exchanges
The growing volume for US BTC ETFs doesn’t necessarily equate to reduced revenue overall for crypto exchanges, however.
One reason, according to Ben Mills, chief executive officer of crypto payment processor Meso, is that “there’s very clearly a network effect” around the success of ETFs spurring additional spot crypto trading.
Not to mention the fact that bitcoin ETFs require physical bitcoin — a boon to exchanges such as Coinbase, which is a custodian for most of the new ETFs and is able to charge a fee for holding their assets.
“It’s more [a] ‘rising tides helps all ships’ moment,” Goh said. “If you look at the underlying asset, it still needs to be traded somewhere. When someone creates a bitcoin ETF, the underlying bitcoin needs to be bought.”
In the buildup to the halving, an event that’s historically been bullish for bitcoin, the cryptocurrency’s price has given up some ground, losing about 5% in the last 24 hours to trade around $61,000.
Read more: Bitcoin’s Fourth Halving Is Right Around the Corner. Is It Still a Good Time to Buy?
Still, BTC ETFs are well below the spike that marked their March 5 peak, in volume terms, of $12.9 billion. On Wednesday, the vehicles commanded a $54 billion market capitalization and a daily total volume of $3.5 billion, with iShare’s Bitcoin Trust commanding nearly half of that amount.
Examples of other countries clearing regulatory hurdles to push into the BTC space have begun to crop up, including Hong Kong, which has its own products in the works imminently, plus ether (ETH) spot ETFs.
Read more: How Much Money Could Pour into Hong Kong’s New Bitcoin, Ether ETFs?
“It’s definitely a net benefit overall for the industry,” Goh said of the rise in ETF trading volumes. “It’s just another way of representing the bitcoin market risk in a different, regulated, legal structure, and the end users, the retail users, the institutional users will find the way that works best for them.”
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