GBTC: The Biggest Spot Bitcoin ETF Arrives

GBTC: The Biggest Spot Bitcoin ETF Arrives

The Grayscale Bitcoin Trust, with more than $20 billion in assets, converted to a spot bitcoin ETF Jan. 10.

Reviewed by: Staff
Edited by: James Rubin

The U.S. Securities and Exchange Commission approved ETFs that invest directly in bitcoin after the market closed on Jan. 10. And like that, the market wasted no time rolling out eight new products on Jan. 11. At $37.07 per share on Jan. 19, the Grayscale Bitcoin Trust (GBTC) had about $24 billion in assets under management. GBTC trades an average of more than 37 million shares daily and charges a 1.50% management fee.  

The other seven ETFs that hold Bitcoin are: 

While the ETFs have different expense ratios, GBTC ranks as the most liquid product. Liquidity is critical for investors and traders as it provides the tightest bid-offer spreads and the most correlation to volatile bitcoin prices.  

GBTC vs Bitcoin Since Jan. 11 

The day-to-day percentage gains or losses for bitcoin and GBTC from Jan. 12 through Jan. 18 were as follows: 

  • Jan. 12: Bitcoin fell 0.1% lower, GBTC fell 0.7% 
  • Jan. 16: Bitcoin fell 0.9%, GBTC rose 1.0% 
  • Jan. 17: Bitcoin fell 0.1%, GBTC rose 0.6% 
  • Jan. 18: Bitcoin fell 3.5%, GBTC fell 2.9% 

We should never expect the same daily results from bitcoin compared to GBTC as bitcoin trades around the clock, while ETFs are only available during stock market trading hours. Over the early days of the leading spot bitcoin ETF, GBTC has done an decent job tracking the cryptocurrency.  

Bullish on Bitcoin 

Bitcoin remains in a bullish trend despite the recent pullback.

After the cryptocurrency's explosive move to its late 2021 high, an implosive plunge followed. Bitcoin found a bottom in November 2022 and has made higher lows and highs throughout 2023 and into early 2024.  

While the trend remains bullish, the leading cryptocurrency reacted to the SEC’s approval of spot bitcoin ETFs with “buy the rumor and sell the fact” price action.  

Qualified Spot Bitcoin Approval

SEC Chairman Gary Gensler did not throw his whole-hearted support behind bitcoin when approving the spot ETFs. The Chairman’s comments speak for itself: 

“While we approved the listing and trading of certain spot bitcoin [Exchange Traded Product] ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto. 

Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast, bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering… sanction evasion and terrorist financing.” 

The approval was far short of any endorsement.  

Is GLD a Model? 

Many investors and traders believe bitcoin is the new gold, and the highly successful SPDR Gold Trust (GLD) is a model for GBTC and other spot bitcoin products. GLD made gold investing more accessible for a vast swath of the addressable market. Since GLD’s introduction in November 2004, gold prices have made higher lows and highs in a rally that continues in 2024.  

Meanwhile, the SEC’s approval comes with an element of validation. The regulation will make more market participants comfortable owning bitcoin-related assets in standard equity accounts. 

Heeding Chairman Gensler’s cautionary message is critical. The potential for significant rewards in bitcoin and all cryptocurrencies comes with substantial risks. The explosive and implosive price history is why investors and traders should only invest capital they’re willing to lose.  

While a compelling case exists for global currencies that governments do not influence, remember that the most powerful aspect of governing is the control of purse strings. Governments and central banks worldwide often control the money supply and will refrain from surrendering it to cryptocurrencies any time soon.  

If the market cap of the cryptocurrency asset class in jumps significantly, expect legislative bodies and leaders to increase regulation and in some cases restrict or even ban the use of cryptos.  

While the trend is always your best friend and remains bullish, the future remains uncertain, with as many detractors as supporters of this highly volatile asset class. 

Andrew Hecht is a Nevada-based writer and analyst covering stocks, bonds, foreign exchange, cryptocurrency and raw material markets. He has over four decades of experience in markets across all asset classes, concentrating on commodity markets. Hecht was a senior trader at Salomon Brothers in the 1980s and 1990s, running sales and trading businesses. In 2013, McGraw Hill published his book, “How to Make Money in Commodities."