Cryptocurrency Corner: November/December 2021

ETF Report takes the pulse of the cryptocurrency space, including the performance of leading cryptocurrencies and the top related news items

First-Ever Bitcoin Futures ETFs Debut
The ProShares Bitcoin Strategy ETF (BITO) closed its first day of trading on Oct. 19 as one of the most popular ETF launches ever.

After a particularly volatile hour of early trading in which its price reached a high of $42.55 per share and a low of $40.94, BITO rose beyond the $41 per share mark on calmer volumes over the next several hours. It ended the day at $41.94 per share, with the NYSE ultimately recording $1.01 billion in trades shortly before 5 p.m. on the launch day, including trades executed after the close.

Its dollar volume of approximately $968 million made it the second-largest ETF debut in history, according to data compiled by Bloomberg ETF analyst Eric Balchunas. Only the BlackRock U.S. Carbon Transition Readiness ETF (LCTU) had a larger first day, with $1.16 billion in volume upon its debut in April.

On Oct. 21, the Valkyrie Bitcoin Strategy ETF (BTF) followed BITO into the market, but its debut was much less impressive, ending the day with $38 million in AUM. BITO and BTF both primarily invest in bitcoin futures, although BITO reserves the right to purchase stakes in foreign ETFs and investment vehicles that hold bitcoin directly.

Geared Bitcoin ETF Filings Withdrawn
In just under a full week, the SEC put the kibosh on two issuers seeking to launch inverse and leveraged versions of bitcoin futures-linked ETFs.

In the span of hours on Tuesday, Oct. 26, Valkyrie Funds filed for an ETF that provided leverage of a multiple of 1.25 over the price of bitcoin futures, while Direxion filed for a fund providing -1x exposure.

However, both issuers pulled their filings within days, saying that the SEC had requested withdrawals of those ETF proposals that same day based on reasons from a 2018 letter outlining the SEC’s questions on cryptocurrencies and fund management.

Valkyrie issued a withdrawal form on Oct. 29, while Direxion pulled its filing Nov. 2.

Neither issuer disclosed which parts of the letter the SEC had determined were grounds for objection for those filings moving forward, and the SEC did not immediately respond to a request for comment.

While U.S. regulators allowed the ProShares Bitcoin Strategy ETF (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF) to launch midway through October, the next test for backers of the cryptocurrency is approval of a physical bitcoin ETF. However, the SEC denied VanEck’s application for just such a fund as recently as mid-November.

Crypto By The Numbers
Crypto seems to be everywhere lately. But just how big is crypto really, based on the cold hard numbers?

According to CoinMarketCap, the total market capitalization of all crypto assets is $2.6 trillion. That’s a big number, but one that is dwarfed by the market value of traditional assets like stocks and bonds. For instance, as of this writing, the market cap of Apple alone is over $2.5 trillion.

The market cap of all the stocks within the S&P 500 is $40.3 trillion; the market value of the MSCI ACWI Index is $92 trillion; and the global bond market is worth $119 trillion.

From that perspective, crypto looks quite small. And that’s even more the case when you consider that, of crypto’s market cap, 46% comes from bitcoin alone and 19% from ether. All the other crypto assets only account for 35% of the crypto market cap, or $900 billion.

If you go one step further and strip out the top 10 crypto assets—like tether, ada, dogecoin and XRP—the market value shrinks further to $500 billion.

However, for bitcoin to come out of nowhere and be worth more than $1 trillion, and for other crypto assets to collectively be worth hundreds of billions of dollars is an impressive feat.