Institutional Sell Off Bitcoin ETF and Market Monitoring Alerts

It has been 11 days since the SEC approved the Bitcoin spot ETF. Currently, there are 25 ETFs related to cryptocurrency assets in the market, with a total assets under management of $29.16 billion. Among them, there are 11 Bitcoin spot ETFs. Considering the high correlation between Bitcoin ETF performance and the cryptocurrency market, we have established a Bitcoin ETF monitoring list and set up trading alerts to promptly understand the condition of the Bitcoin TradFi market. It is important to note that ARK has sold all of its GBTC shares and a significant amount of Coinbase stocks, as mentioned later.

The Impact of Bitcoin ETFs on the Crypto Market

In my opinion, Bitcoin ETFs are the financial products in the traditional market with the highest correlation to BTC price. This is because they directly or indirectly hold BTC. The next in line are stocks of companies related to BTC, such as Coinbase and MicroStrategy. After that, we have technology and financial stocks related to the cryptocurrency market.

Performance of the Top 6 ETFs After Listing

Grayscale GBTC, which transitioned from futures to spot ETF, is currently the largest Bitcoin ETF in the market with assets under management of $23.5 billion. On its first day of trading, the price opened 14% higher, but it experienced consecutive declines in the following days, mirroring the trend of BTC.

BITO has an asset management scale of $2.279 billion. We’ve mentioned it before. It is currently the second-ranked ETF in the market and is also a futures contract. This ETF is linked to SEC’s futures BTC, so their trends are basically the same.

BlackRock’s spot ETF is IBIT, with current assets under management of $1.172 billion, ranking third. Similarly, it experienced significant selling after its launch, which then led to a continuous decline in BTC and the cryptocurrency market.

FBTC is a spot ETF launched by Fidelity with an asset management scale of $1.01 billion, only half the market value of IBIT. Its performance after listing is consistent with BTC.

BITB and ARKB are currently ranked fifth and sixth, respectively. They are both spot ETFs and, without exception, have experienced a decline in price after opening.

The above are ETFs with assets under management and market capitalization exceeding $100 million, representing 98% of the Bitcoin ETF market share and are quite representative. Based on past performance, several points can be summarized:

• ETFs’ trends and correlations are highly consistent with BTC and have a significant impact on the cryptocurrency market.
• Previously, Grayscale GBTC and BITO were both futures-based ETFs, currently accounting for 88% of the entire cryptocurrency market’s ETFs. The market share of newly listed spot ETFs is relatively small.
• Grayscale GBTC holds 80% of the total assets under management in the Bitcoin ETF market, establishing an absolute dominant position.
• Whether it is traditional futures-based ETFs or recently launched spot ETFs, they cannot avoid the fate of a sharp decline after listing.

Building a Watchlist

Most people are unable to stay updated on the latest developments in the ETF market. However, in the Bitcoin TradFi market, market sentiment plays a significant role in spot trading of BTC. Therefore, we have created a watchlist:

The market information and daily data of 11 bitcoin spot ETFs approved by the SEC are recorded above. You can use this monitoring list to check the daily price and trading volume changes. According to the current data, GBTC accounts for 48% of the entire spot ETF market trading volume, followed by BlackRock’s IBIT with 23%, and then Fidelity’s FBTC with 18%. The total trading volume at the close on Friday was $78.47 million, an increase of 20%.

It is obvious, GBTC is listed on the New York Stock Exchange, IBIT is listed on Nasdaq, and FBTC is on the Chicago Mercantile Exchange. The first two are custodied by Coinbase, which indicates the importance of Coinbase.

After the decline of Coinbase stock, the selling pressure on BTC has clearly increased. Coinbase is the most important custodian for Bitcoin spot ETF. Earlier, the market bought Coinbase due to the expected revenue from the ETF. However, when the positive news was confirmed, they reduced their holdings of Coinbase stock. The most obvious example is the action taken by ARK, buying in early 2023 and selling by the end of the year.

From coinbase data and futures ETFs, we can conclude another point:

The market mainly depends on expectations. The expectation of ETF listing has long been digested by the market, which is mainly reflected in the prices of GBTC, BTC, COIN, and BITO in the past six months.

There is another data worth paying attention to. The data shows that ARK was originally the largest shareholder of GBTC, but in the latest disclosure, it is shown that ARK, managed by Cathy Wood, sold all GBTC and simultaneously reduced its holdings of Coinbase and Tesla stocks.

It is worth noting that the last major sell-off occurred at the peak of the bull market in late 2021. In the fourth quarter of 2023, all GBTC holdings were directly sold. However, the ARKW fund still holds a small amount of GBTC, with ARK Investment being the seller.

Currently, ARK’s largest investment portfolio consists of Coinbase, PATH, and Tesla stocks. However, Coinbase stocks have also been significantly reduced. Interestingly, this happened before the approval of the Bitcoin spot ETF, implying that ARK was not optimistic about the spot ETF at the time, and even had doubts about the cryptocurrency market in 2024.

There is a question worth pondering: if you had sold all of your GBTC in the past at the same price or even a higher price, would you buy it back? Obviously, you wouldn’t, and neither would Cathie Wood from ARK.

I believe selling GBTC may have two purposes:

1. Closing the risk exposure of whether the ETF would be approved at that time, considering that GBTC was only futures.

2. In order to eventually transfer funds to their own ARKB spot ETF, supporting their own “child”.

In other words, ARK still holds Coinbase stocks and Bitcoin ETF, but has realized profits from some of the positions bought at the beginning of the year, and may buy ARKB at a more suitable position.

Establishing Trading Alerts

Trading alerts are particularly important for the secondary market. We noticed a 20% increase in trading volume last Friday, indicating new funds entering the market. However, prices remain sluggish, and it is uncertain whether the buying power can persist and change the current state of the ETF market. We have established trend signal alerts and are closely monitoring the positions of various institutions to promptly grasp any changes in the Bitcoin TradFi market trends.

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