Samara Cohen, chief investment officer of ETFs and index investments at Blackrock, center, rings the bell when bitcoin spot ETFs launch on the Nasdaq in New York on January 11, 2024.
Stephanie Keith | Getty Images
Bitcoin exchange-traded funds saw big swings during early trading on Thursday, mirroring a volatile day for cryptocurrency prices more broadly.
During midday trading, Grayscale Bitcoin Trust (GBTC) rose 1.3%, while iShares Bitcoin Trust (IBIT) fell more than 4% after an early rally. Both funds saw millions of shares in trading volume in the first 10 minutes of the trading session.
The two funds are among the first of 11 funds to trade on Thursday.
The Grayscale fund is the largest of the group, having been transferred from an over-the-counter trust that already had more than $28 billion in assets. The Hashdex fund is a strategy change from an existing bitcoin futures ETF, and SEC filings indicate that the change has not yet taken effect as of Thursday morning.
The moves for the funds came as bitcoin saw volatile trading. The digital currency briefly touched the $49,000 mark on Thursday morning before falling back below $47,000, a gain of less than 1%, according to Coin Metrics. Bitcoin is traded around the clock, so the movements of the funds on the first day could be affected by the exact timing of their launch.
ETFs are an investment vehicle where investors buy shares that represent a claim on the fund’s underlying assets. Some of the most popular ETFs are stock index funds, although other funds in this category track bonds, derivatives and commodities such as gold.
Financial advisors and institutional investors often use ETFs because of their liquidity and tax advantages compared to mutual funds. Asset managers are betting that bitcoin ETFs will bring new investors to cryptocurrencies.
“That’s really what ETFs were created to do — to take the difficult, complex stuff and make it easier to trade in compliance. That’s going to mainstream the asset class,” WisdomTree CEO Jonathan Steinberg told CNBC’s “Money Movers.”
“This will allow a less technologically sophisticated investor to buy bitcoin in a way that is very convenient for them,” Steinberg added.
Investors and financial advisors will be closely watching not only how Bitcoin ETFs perform, but also how well they track the price of Bitcoin. Large differences between the fund’s price and the price of the underlying bitcoin that last for several days could be a sign of weak trading or structural issues with the ETF and scare away potential buyers, even if the fund temporarily outperforms spot bitcoin.
Trade volume will also be a key metric for investors, as funds with more trades are considered more efficient.
Different price points could also affect the success of the funds. Several fund issuers have reduced their proposed fees just before launch, and many are offering temporary exemptions that will reduce their management fee to 0% for a short period of time.
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