It may feel like ages ago in a fast-paced crypto industry, but this year’s launch of spot ETFs for Bitcoin and Ethereum—in January and July, respectively—ushered in a seismic shift for the crypto industry.
Spot Bitcoin ETFs have attracted mountains of cash, and have enabled investors to gain exposure to BTC without the hassle of managing private keys. They have also lent legitimacy to the asset on Wall Street. Meanwhile, spot Ethereum ETFs validated the asset’s regulatory status. And despite a subdued debut, they have gained momentum in recent weeks and potentially opened the door to similar products for Solana and XRP in the U.S.
When Bitcoin ETFs began 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 even breached $108,000 in December, following momentum sparked by Donald Trump’s White House victory.
As a group, eleven spot Bitcoin ETFs now hold $113 billion in assets under management, or AUM, according to CoinGlass. Bloomberg ETF analyst Eric Balchunas had told Decrypt in early December that the number of Bitcoin held by these products could overtake the estimated 1.1 million Bitcoin mined by Bitcoin’s enigmatic creator, Satoshi Nakamoto, by Christmas.
Turns out, the symbolic milestone was shattered just two days later.
“It’d be a fitting cap on a storybook launch,” Balchunas said at the time. “This stuff is an anomaly in physics. There has never been a launch like this, and there will never be another one.”
When it comes to spot Bitcoin ETFs, the products brought “excitement, anticipation, opportunity, [and] legitimacy” to the asset, Balchunas added. Removing any friction associated with getting exposure to Bitcoin, he said the power of matching investors with brands they know and trust in brokerage accounts could not be overstated.
It’s a marked departure from the common refrain of “Not your keys, not your coins,” following the collapse of FTX in 2022—that is, the believe from many crypto die-hards that self-custody is the only reasonable way to own crypto. By 2024, the value proposition of Bitcoin exposure without key management was too good for some investors to pass up.
Nathan Geraci, president of investment advisor The ETF Store, told Decrypt that he was always highly bullish on the prospects of Bitcoin ETFs. At the start of the year he predicted that the group would “obliterate every ETF launch record out there” before they began trending. However, he added, “net inflows into these products has exceeded even my extremely optimistic expectations.”
BlackRock enters the chat
With more than $53.5 billion in AUM, BlackRock’s iShares Bitcoin Trust ETF (IBIT) emerged as an industry leader this year. Towering over Grayscale’s Bitcoin Trust (GBTC), the second-largest spot Bitcoin ETF by AUM at $20 billion, IBIT’s profile was boosted by BlackRock CEO Larry Fink, who highlighted Bitcoin as an investment multiple times 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 currency. Months later, Fink called himself a “major believer” in Bitcoin, framing the asset as an investment for those with an increasingly frightened view toward the world.
As far as stores of value are concerned, Bitcoin advocates often compare Bitcoin to “digital gold.” Within BlackRock’s suite of products, that link crystallized in November, when IBIT’s AUM surpassed that of BlackRock’s iShares Gold ETF (IAU)—first offered in 2005.
As of this writing, it ranked 32nd among all U.S. ETFs by AUM, according to the ETF Database.
While analysts noted to Decrypt that BlackRock’s push into the crypto space eroded industry stigma in 2023, Geraci said the stellar performance of spot Bitcoin ETFs was anything but a given.
“Back in January, I’m not sure anyone envisioned the spot Bitcoin ETF category eclipsing $100 billion in assets before year-end,” he said. “As a matter of fact, there were plenty of naysayers who thought the category would never hit that mark.”
A different market
Spot Bitcoin ETFs garnered massive 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 approval of spot Bitcoin ETFs had increased trading volumes for Bitcoin on crypto exchanges, while strengthening the market’s ability to absorb large orders. At the same time, Kaiko analysts noted that Bitcoin’s trading activity became concentrated around weekdays, when Wall Street is open for business.
After branding himself a “crypto president” on the campaign trail, Trump’s reelection sparked a record-setting rally in Bitcoin’s price. When it came to BlackRock’s Bitcoin product, IBIT served as a connective tissue that enabled investors to trade Bitcoin in an unprecedented way.
As Bitcoin jumped past $75,000 on November 6—the day after Trump’s reelection—IBIT’s trading volume crossed $1 billion in 20 minutes. By the end of the day, IBIT’s trading volume had swelled to $4.1 billion.
“For context, that’s more volume than stocks like Berkshire, Netflix, or Visa saw today,” Balchunas wrote on X (formerly known as Twitter).
In an interview, Balchunas noted that spot Bitcoin ETFs smashed record after record this year, from trading volume stats to an initial pace of inflows. Of note, BlackRock’s spot Bitcoin ETF reached $10 billion in AUM faster than any ETF ever launched in history. It was also the first ETF to hit $50 billion in AUM—more than five times faster than any other ETF in history.
When the SEC approved the listing and trading of options for spot Bitcoin ETFs in October, analysts told Decrypt the development would make it easier, cheaper, and safer for institutional players to gain Bitcoin exposure.
“I mostly consider this another brick in the wall of normalization,” Bitwise CIO Matt Hougan told Decrypt. “We should be happy about it.”
Grayscale’s gulch
It would be impossible to capture 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 paved the way for the products’ eventual approval.
The SEC dragged its feet on approving applications for spot Bitcoin ETFs for a decade, citing concerns about market manipulation. But the U.S. Court of Appeals for the D.C. Circuit found last August that the SEC’s repeated denial of Grayscale’s ETF gambit was unlawful.
While billions of dollars flowed out of GBTC this year—$21 billion, as of this writing—Grayscale’s then-CEO Michael Sonnenshein said the outflows were anticipated. In April, he pointed to the bankruptcy estates of collapsed crypto firms, which were “forced” to liquidate GBTC holdings, among traders capitalizing on GBTC’s once-sizable discount due to its former structure.
Analysts also attributed GTBC outflows to the product’s expense ratio as well, which stands at 1.5%. Making the product more costly to hold than GBTC’s competitors, with expense ratios as low as 0.19%, Grayscale responded with a GBTC spinoff ETF featuring a 0.15% expense ratio.
A similar dynamic befell the Grayscale Ethereum Trust (ETHE), which saw over $1 billion in outflows during its first three trading days as a full-fledged ETF, according to CoinGlass. While the bleeding has largely stopped, and Grayscale has launched a spinoff ETF for ETHE too, the outflows dampened investor enthusiasm when spot Ethereum ETFs launched this summer.
Ethereum and beyond
Because SEC Chair Gary Gensler had sidestepped questions about Ethereum’s regulatory status, many doubted that applications for spot Ethereum ETFs would be approved under his leadership. In a stunning development, however, the SEC flashed a green light for the products in May.
A lawsuit filed by the Ethereum software company Consensys had also alleged that the SEC internally viewed ETH as a security. (Disclosure: Consensys is one of 22 investors in Decrypt.) The distinction would’ve forced ETF hopefuls to pursue a different avenue, but the SEC effectively validated Ethereum’s status as a commodity with its move.
Still, spot Ethereum ETFs have seen far lower inflows than spot Bitcoin ETFs have. Weighed down by $3.6 billion in ETHE outflows, the group of products from eight issuers have attracted $2.3 billion worth of inflows since their July debut, as of this writing, according to CoinGlass.
Meanwhile, the ETFs haven’t been a salve to Ethereum’s price the way similar products were for BTC. After peaking around $4,100 earlier in December, the cryptocurrency currently trades hands around $3,400. And unlike Bitcoin, Ethereum hasn’t broken its all-time high mark in 2024, nor has it come close to doing so.
It makes sense that investors haven’t flocked to spot Ethereum ETFs en masse, given that Ethereum’s story is relatively unknown compared to Bitcoin’s within the minds of mainstream investors, FlaconX Head of Research David Lawant told Decrypt.
Bitcoin’s narrative as a store of value has been well established, Lawant said. But regardless of whether Ethereum is conveyed as a tech play, smart contract platform, or an app store for Web3 applications, the narrative surrounding Ethereum isn’t as established outside crypto circles.
“Ethereum is a different beast” compared to Bitcoin, Lawant said. “There’s different ways you can spin it, but regardless of how you tell the story, it is a different story.”
At present, Bitcoin and Ethereum are the only digital assets with spot ETFs in the United States. Yet, alongside hopes of a crypto-friendly SEC during Trump’s administration, asset managers have filed for ETFs covering Solana, XRP, and Litecoin, among a growing list of other digital assets. Even Dogecoin ETFs don’t seem so far-fetched in this climate, analysts told Decrypt.
Whether or not applications for those cryptocurrencies are approved may be a question for Gensler’s slated successor, Paul Atkins, a former SEC commissioner and Trump’s nominee for the role. Meanwhile, spot Bitcoin and Ethereum ETFs will be trading, following up their first year with a high bar to shoot for.
Edited by Stacy Elliott
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