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How much capital will Bitcoin ETF bring to Bitcoin after 40 days?

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After the approval of ETF, the net increase in holdings of 110,000 bitcoins resulted in a total position size of $37.21 billion.

Original Title: "Gray Fall, BlackRock Full? How Much Money Has Flowed into the Cryptocurrency Market After the Approval of Bitcoin ETF"

Original Author: Frank, PANews

On January 11th, the US Securities and Exchange Commission (SEC) finally approved the application for a Bitcoin ETF, and 11 Bitcoin ETFs were listed. The entire crypto community also welcomed a new round of gains with this news. After experiencing a brief drop from 49,000 to 38,500, the price of Bitcoin gradually rose again and successfully broke through the $53,000 mark. So, is the Bitcoin ETF really becoming the biggest positive driver of this bull market in the entire crypto market? PANews has made a comprehensive inventory of the Bitcoin ETF dynamics during this period, and in more than 40 days, how much funding has the Bitcoin ETF added to Bitcoin's entry?

ETF increased its net holdings of 110,000 bitcoins after approval, with a total position size of $37.21 billion

Since the introduction of ETF, as of February 25, 2024, the number of bitcoins held by 11 ETFs has increased from 619,491 to 732,549, with a total increase of 113,058 bitcoins. The total holdings of Bitcoin ETFs is 732,000 bitcoins, and the assets under management have increased from $28.59 billion to $37.21 billion, with a total increase of $8.6 billion in assets under management.

According to this data, the average initial holding price of Bitcoin ETF was about $46,163, and the current average holding price is $50,803.

Currently, the holdings of Bitcoin ETF account for 3.73% of the total supply, which exceeds the number of Bitcoins in 596,000 Binance exchange wallet addresses (coincarp data). The top 30 Bitcoin spot exchanges currently hold approximately 1.2 million Bitcoins (excluding the amount held in ETF custody). Judging from the net increase of 110,000 Bitcoins held, the direct increase in circulation demand brought by ETF accounts for about 9.34% of the cryptocurrency market, which directly stimulated the price of Bitcoin to rise above $53,000.

Gray-scale reduction of 175,000 bitcoins, BlackRock eats up 127,000

Although the overall holdings of Bitcoin ETF have increased, the price of Bitcoin experienced a significant drop from $49,000 to $38,500 in the days following the approval of Bitcoin ETF on January 11th. The main reason for this sharp decline is due to the reduction of holdings by Grayscale.

As investors do not directly purchase Bitcoin when buying ETFs, ETF issuers need to purchase corresponding Bitcoin spot market through cryptocurrency exchanges such as Coinbase to match market circulation based on secondary market order demand. Similarly, institutions such as Grayscale need to sell corresponding Bitcoin shares to eliminate discounts after the ETF is approved, as Grayscale's Bitcoin GBTC previously had a discount.

Before the approval of Bitcoin ETF by the SEC in the United States, Grayscale has always been the largest holder of Bitcoin. Due to the nature of GBTC as an unredeemable trust fund, Grayscale's Bitcoin holdings have always been in a state of only increasing. This state was broken after the approval of Bitcoin ETF. As ETF is a fund with redemption feature, Grayscale's Bitcoin holdings began to decrease rapidly, from 617,000 to 445,000.

There are several reasons for this: the most important reason is the 6 times higher management fee than its competitors, based on the current disclosed management fees of various ETFs. Most ETFs maintain management fees in the range of 0.49% to 0.19%, while only Grayscale's management fee remains at 1.5%, which is about 6 times higher than its competitors. For large investors who invest in ETFs, Grayscale's management fee is obviously not advantageous. On the other hand, Ark, which was once one of the top ten holders of GBTC, has established its own ETF (ARKB) and will also transfer funds to its own ETF pool. In addition, the lack of arbitrage space for GBTC discounts has also led to many GBTC holders transferring their positions.

On the other hand, BlackRock launched IBIT, which increased its Bitcoin holdings from 228 in January 10th to 126,900 currently. BlackRock is the world's largest asset management company, with assets under management of approximately $8.9 trillion globally. It is one of the most competitive ETF products in terms of customer resources and brand effect. Currently, the Bitcoin ETF holdings managed by BlackRock and Fidelity Investments have exceeded 190,000, which is more than Grayscale's reduction. Therefore, from this perspective, the increase in Bitcoin ETF holdings has not yet shown significant effects, but is in a stage of competition among various issuers.

Coinbase holds 637,000 bitcoins in custody, with custody fees expected to exceed $30 million by 2024

After the approval of ETF, various ETF fund companies seem to have become the most popular enterprises in the market. In fact, this policy landing may benefit Coinbase the most, which has a chance to regain its leading position in the cryptocurrency exchange market in 2024.

Among all the ETFs issued, except for Fidelity's self-custody of 91,000 bitcoins, almost all other ETF funds have chosen Coinbase as the custodian for holding bitcoins. Coinbase currently holds 637,000 bitcoins for ETF issuers, accounting for 86.9% of all ETF holdings, surpassing Binance's holdings of 590,000 bitcoins.

According to Coinbase's financial report, the revenue for Q4 2023 was $953.79 million, exceeding the market's general expectation of $822.36 million. The report also shows that Coinbase's customer asset custody revenue in 2023 was $20 million. Based on the industry's low fee rate of 0.1%, the custody of Bitcoin ETF's current assets of $32.4 billion will bring Coinbase $32.49 million in revenue in 2024, which will increase as the ETF's scale grows in the future.

除了灰度之外，贝莱德和富达投资则是目前的 ETF 发行商中最不可忽视的中流砥柱。贝莱德目前的 ETF 产品有 427 个，IBIT 产品的总资金管理（AUM）为 65 亿美元，在贝莱德 ETF 产品中排名在 82 名。随着市场趋于成熟，IBIT 在其中的排名仍有望继续上涨。而另一个资产管理巨头 Fidelity Investments（富达投资）也紧随其后，约为 46.5 亿。目前，灰度、贝莱德、富达投资的总资金管理规模合计占 ETF 的 90.6%。

According to the fee standards of the three companies, if they maintain their current market share, Grayscale's management fee income is about 340 million yuan (1.5% fee), BlackRock is about 16 million US dollars (0.25% fee), and Fidelity Investments is about 11 million US dollars (0.25% fee). Of course, if Grayscale continues to maintain its current management fee level, it may soon lose its current Bitcoin holding scale.

Currently, it is expected that an Ethereum ETF will also be available on the market by 2024, with BlackRock being one of the main driving forces behind it. As more and more crypto assets enter mainstream finance, this market will become more mature and full of possibilities.