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The approval and launch of spot Bitcoin exchange-traded funds (ETFs) in the US have marked one of the most significant developments in recent years. As 2024 comes to a close, with $129 billion in total net assets held by these ETFs, it is clear that 2025 will be an even more groundbreaking year for this emerging market.
What are Spot Bitcoin ETFs?
ETFs (Exchange-Traded Funds) are financial products that reflect the value of their underlying assets. They offer a regulated, transparent, and highly liquid way for investors to access assets they might otherwise be unable or unwilling to hold directly. This format is particularly appealing for cryptocurrencies like Bitcoin, providing a regulated, widely accessible, tax-efficient investment option.
A Brief History of Spot Bitcoin ETF Rejections
The US Securities and Exchange Commission (SEC) has consistently rejected all spot Bitcoin ETF applications since 2013. Firms such as VanEck, WisdomTree, Bitwise, ARK Invest, 21Shares, and Grayscale faced repeated refusals.
The Approval of Futures-Based Bitcoin ETFs
In 2021, the SEC approved futures-based Bitcoin ETFs, with ProShares’ BITO being the first to launch. Initially a success, it reached $1 billion in assets within just two days. However, investors’ interest in BITO declined quickly, with its assets under management (AUM) dropping from a peak of $1.4 billion to $500 million within a year.
The Limitations of Futures-Based ETFs
Futures-based ETFs, while allowing their holders to profit from Bitcoin price movements, lack the efficiency of spot ETFs, which hold actual BTC. Furthermore, spot ETFs create immediate buying or selling pressure, directly influencing Bitcoin’s price and liquidity.
The Rise of Spot Bitcoin ETFs
In the world of ETFs, the spot Bitcoin ETFs quickly became a phenomenon. From the outset, the nine new ETFs (excluding Grayscale and Hashdex) shattered many industry records, generating $2.2 billion in trading volume on the first day, with the iShares Bitcoin Trust ETF (BITO) leading the pack.
The Performance of Spot Ether ETF
Ether (ETH), the second-largest cryptocurrency by market capitalization, entered the ETF space with the launch of its first dedicated spot ETFs in July 2024. However, their performance was more subdued compared to Bitcoin’s. Starting with $8.8 billion from the Grayscale Ethereum Trust, their total AUM grew modestly to $11 billion by year-end.
Will More Crypto ETFs Launch in 2025?
The start of 2025 shows that interest in spot Bitcoin ETFs remains strong, even amid a market correction. According to Farside, the ETFs have already attracted $1.1 billion in net inflows year-to-date. As Bitcoin continues to gain recognition in political and financial circles, this momentum could persist and maybe even expand to other cryptocurrencies.
Conclusion
The approval and launch of spot Bitcoin ETFs have marked a significant turning point for cryptocurrency investing. With $129 billion in total net assets held by these ETFs, it is clear that 2025 will be an even more groundbreaking year for this emerging market. As the landscape continues to evolve, investors are advised to conduct their own research and consult with financial experts before making any investment decisions.
