Off To The Races

The “Cointuckey Derby” is off to the races. One week in, with three full trading days completed, let's dissect the drama, events, and money moves following the SEC's historic spot Bitcoin ETF approval.

Record-breaking volume, but with one caveat: Day one saw a whopping $4.6 billion traded – a new ETF record. And over the course of the past three trading days, that number has ballooned to ~$10 billion. However, don’t confuse volume with net inflows. Much of this came from investors rotating out of Grayscale (GBTC) and seeking lower-fee options.

Inflows (the real story): Inflows, which tell us how much new money is joining the party, are roughly +$780 million. That’s an impressive number as the new ETFs have more than offset the GBTC selling spree (now up to -$1.2 billion. Ouch).

Who’s winning the race? Blackrock, hands down, with its iShares Bitcoin Trust (IBIT) seeing nearly half a billion dollars worth of inflows in two days' time. So far, the second most popular bitcoin ETF choice has been Fidelity’s Wise Origin Bitcoin Fund (FBTC).

In the loser’s bracket is a battle between WisdomTree Bitcoin Fund (BTCW) and Valkyrie Bitcoin Fund (BRRR). It’s worth mentioning that Hashdex (DEFI), home to arguably the worst ticker symbol for a “bitcoin” ETF, has yet to cross the starting gate as it still awaits final clearance from the SEC.

Key Events

The ETF frenzy has triggered announcements from banks, exchanges, and funds strategizing for the future. Here are some highlights:

BTC did NOT pump: Despite the frantic anticipation and celebratory tweets, BTC’s price didn’t move in the direction we all hoped for. Perhaps we can chalk it up as a “sell the news” event, similar to what happened when Bitcoin Futures ETFs launched years ago, or the Coinbase IPO in 2021. The GBTC selloff could have been a factor, along with rumors of FTX's bankruptcy estate unloading.

Our Take: Go figure. I blame our cheesy Editor’s Note from our last issue. Not the first time we succumbed to the hype, and probably won’t be the last, but that’s crypto – anything can happen.

Here comes the drama: A handful of the world's largest asset managers, including Vanguard, are blocking some clients from accessing the new ETFs. Why? Because they don’t fit with the firm's investment philosophy. Merrill Lynch, Edward Jones, and Northwestern Mutual are also holding off offering bitcoin ETFs. Other firms made clients sign volatility liability waivers before “unlocking” access.

Our Take: This is why we’ll always recommend buying BTC directly through a trusted (and regulated) exchange like Coinbase and then taking matters into your own hands. Moves like these prove that trusting your money with 3rd parties still come with risks.

VanEck closes their futures ETF: With spot bitcoin ETF being approved, bitcoin futures ETFs are unneeded, citing poor performance and lack of investor interest.

Upping the ante: Yesterday, ProShares filed prospectus materials for five leveraged and inverse bitcoin exchange-traded funds. One of those funds “seeks daily investment results, before fees and expenses, that correspond to two times (2x) of the daily performance of the Bloomberg Galaxy Bitcoin Index.”

Our Take: Safe to say, Vanguard won't be embracing these.

What to Watch Going Forward:

Inflows. Inflows are the ultimate measure to keep tabs on as they can directly impact Bitcoin’s limited fixed supply, in turn propping up prices. If inflows start to rise, expect BTC prices to rise along with them. Follow @EricBalchunas and @JSeyff on twitter to stay on the beat.

MVRV Ratio. This ratio helps assess potential sell-offs from profitable holders. Currently, at ~2, it suggests bitcoin isn't overvalued, but ETF inflows could influence it.

And, alas, just remember: This is a longer race than just a week of trading.

TradFi works… slowly.

This isn’t degens flooding into Blast. It’s traditional investors who schedule hour-long calls with their financial advisors just to allocate a portion of their savings to the S&P. In other words, this wave of adoption will take some time.

Circle Files for an IPO

Circle, the issuer of the USDC stablecoin, is looking to go public in the United States.

What else do we know? Honestly, not much. Because Circle submitted their filing confidentially, the company doesn’t have to release any private or sensitive information until 15 days before an IPO. As stated in the filing:

But although the company is being tight-lipped about the details, there is still a lot to discuss:

3rd Times The Charm

To give some backdrop, it’s worth noting that this isn’t Circle’s first attempt at a public listing.

Might the 3rd time be the one that sticks?

The Good, The Bad, and The Ugly

Circle’s USDC is the second-largest stablecoin by market cap, worth ~$24 billion. Although impressive, this number is down from $45 billion 2023. Tether’s USDT by comparison is worth ~$95 billion.

To stymie concerns, Circle put out a “State of the USDC Economy” on Monday highlighting the growth of USDC in 2023. Highlights include:

Beyond the growth, Circle is also banking on the fact that they are the most regulatory friendly operators in the stablecoin game.

And while they have yet to convince the SEC that it should be allowed to go public, speaking at Davos this week, CEO Jeremy Allaire stated that there is a “very good chance” lawmakers approve a stablecoin bill in 2024.

Prediction market Polymarket currently has Circle’s IPO chances by June at 68%.

A major potential winner is also Coinbase (COIN) who in August took a direct equity stake in Circle.

The Race is On

It’s no coincidence that Circle put in their confidential filing immediately after spot-based bitcoin ETFs were approved. The regulatory climate seems to be slowly shifting, and crypto companies are taking notice.

We wouldn’t be surprised to see more filings in the coming year.

Our short list?

2024 may just be the year of the crypto stocks.

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