Tuesday was an action-packed day for bitcoin. The largest digital currency by market capitalization ascended to a new all-time high. It extended its 2024 gain to over 63%. And then it almost immediately succumbed to a breathtaking decline of 14%.
Some of those losses were recouped, and while it is clear that the crypto’s volatility is creeping higher as the digital currency does the same, the bullish trend remains intact. Some of that is attributable to the spot bitcoin exchange traded funds that debuted last month.
Broadly speaking, those products are proving to be hits among market participants and acting as new, significant buyers of the digital currency in the process. And recent data indicates these rookie ETFs are buying more of the crypto on a daily basis than is being mined.
Spot ETFs Boon for the Cryptocurrency
Longtime followers of the cryptocurrency space know it took years for the Securities and Exchange Commission (SEC) to approve spot ETFs. At times, the commission appeared overtly hostile toward these efforts and crypto in general. That perspective changed, and prices for the digital currency have benefited as a result.
“The move has widened the mass-market accessibility of Bitcoin, helping the crypto sector to turn the page following a bear market in 2022 and a string of subsequent bankruptcies, including the implosion of Sam Bankman-Fried’s FTX exchange,” reported Phillip Lagerkranser for Bloomberg.
While likely just a coincidence, the January debut of the spot bitcoin ETFs occurred just three months of the quadrennial halving. That means that two supply-reducing dynamics are at play for the cryptocurrency at the same time. Given the digital asset’s 2024 price action, it’s clear it’s benefiting from those scenarios.
Impending Reduction in Supply Growth
“A steady tide of money has poured into the ETFs issued by investment heavyweights including BlackRock Inc. and Fidelity Investments. The net inflow of almost $8 billion in less than two months is colliding with a looming reduction in Bitcoin’s supply growth — known as the halving — that is also stoking bullish sentiment,” according to Bloomberg.
These spot ETFs trading in the U.S. include the VanEck Bitcoin ETF Trust (HODL), Invesco Galaxy Bitcoin ETF (BTCO), WisdomTree Bitcoin Fund (BTCW), Bitwise Bitcoin ETF (BITB), Grayscale Bitcoin Trust ETF (GBTC), iShares Bitcoin Trust (IBIT), Fidelity Wise Origin Bitcoin Fund (FBTC), and the ARK 21Shares Bitcoin ETF (ARKB).
Beyond providing a boost to bitcoin prices, those ETFs are serving other important functions. Notably, these spot ETFs have brought more institutions into the cryptomarket, which some experts believe could be a longer-ranging theme. Additionally, the ETFs are broadening the audience for digital assets among advisors and previously apprehensive retail investors.
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