Lack of ‘God Candle’ Moment
In the short term, the launch of the spot Bitcoin exchange-traded fund (ETF) did not meet market expectations. There was a lack of significant capital surge and the anticipated ‘God Candle’ moment, resulting in disappointment among investors. This absence failed to inspire a large inflow of capital into the ETF.
Long-standing Discount on GBTC Shares
Many original holders of the Grayscale Bitcoin Trust (GBTC) had been holding shares at a discount to actual Bitcoin for years. These holders were eagerly waiting for the conversion of GBTC to an ETF, hoping to sell their shares at their full market value.
Selling Pressure
The majority of trading volume in GBTC during the ETF launch was driven by selling rather than buying. Original holders who were waiting for the conversion likely sold their shares to realize the full value.
Role of Authorized Participants
Authorized Participants (APs), acting on behalf of ETF managers, play a crucial role in creating an attractive investment security. In this case, with GBTC sellers unlocking their shares due to the ETF conversion, APs redeemed shares and sold underlying Bitcoin, reducing the GBTC ETF Net Asset Value.
Shift to Other ETFs
Sellers of GBTC shares, frustrated with the long-standing discount to Bitcoin, likely shifted their investments to other ETFs instead. This move may have been driven by dissatisfaction with GBTC and a desire for more favorable investment options.
Success of Other ETFs
Despite the spot Bitcoin ETF launch falling short, some other ETFs, excluding Invesco and Valkyrie, saw success. These successful ETFs accurately reflect the amount of Bitcoin they represent without trading at a significant premium or discount to the underlying BTC price.
Hot Take: The Shortcomings of the Spot Bitcoin ETF Launch
The launch of the spot Bitcoin ETF did not live up to market expectations, resulting in a decline in market cap and disappointment among investors. The lack of a significant surge in capital and the anticipated ‘God Candle’ moment contributed to this perception. Additionally, the long-standing discount on GBTC shares and selling pressure during the launch further impacted its performance. The role of Authorized Participants in redeeming shares and selling underlying Bitcoin also played a role. As a result, sellers turned to other ETFs instead. Despite these shortcomings, some other ETFs found success by accurately representing the amount of Bitcoin they hold.
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