Crypto ETFs Are Great But Do They Pose a Different Risk?
With ETFs holding nearly as much Bitcoin as Satoshi's wallet, the establishment's acquisition of the OG token introduces new risks.
Indeed, due to their phenomenal performance, US-based Bitcoin ETFs now own over 1 million tokens or almost 5% of the total supply.
That's close to the sums that have long been stashed away in the wallet of the market's original whale: Satoshi Nakamoto, the mysterious and unknown author of the Bitcoin whitepaper.
Another large buyer might soon appear; a Trump ally in the Senate is trying to pass a bill that would sell part of the Federal Reserve's gold to acquire 1 million Bitcoin for the US government's stockpile.
In business, software company MicroStrategy, owned by Michael Saylor, owns over $38 billion worth of tokens and has been using capital markets to acquire more.
Just a short time ago, when Bitcoin was in its infancy and tokens were trading for pennies on the dollar, all anyone interested was a group of young, libertarian techies who wanted to build a decentralised financial system that the government or Wall Street wouldn't control.
Now, all of this has changed.
These long-standing institutions are now controlling ever-increasing portions of the Bitcoin market.
According to Mark Connors, founder and chief investment strategist at Risk Dimensions, more countries may be prompted to purchase Bitcoin if the United States were to establish a national stockpile of the cryptocurrency.
Concentration risk is the sum of all these factors.
For one, there's a lot of hope that the price will keep going up because of the huge demand, which has been driving it up so far.
One such argument is that, unlike stock ownership, the Bitcoin blockchain's fundamental architecture makes it impossible for even the largest investors to influence its operations.
Both Bitcoin and Ethereum ETFs in the US have seen record-breaking net inflows, fueled by a bullish November. The ETFs collectively recorded over $7.54 billion in monthly net inflows, surpassing the previous high of $6.03 billion set in February for Bitcoin ETFs.
Ethereum ETFs, launched in July 2024, are also gaining traction, with net inflows between November 25 and November 29 reaching $467 million, driven predominantly by BlackRock’s ETHA, which accounted for $300 million.
Additionally, Ethereum is beginning to close the gap with Bitcoin in the ETF space, as its spot ETFs saw daily net inflows of $332 million, outpacing Bitcoin’s $320 million during the same period.
Bitcoin ETFs continue to dominate nonetheless, with BlackRock's iShares Bitcoin Trust (IBIT) amassing $48 billion in flows since its launch, followed by Grayscale's GBTC with $20.9 billion and Fidelity's FBTC with $19 billion.
The broader interest in Bitcoin ETFs comes as the cryptocurrency hovers near $96,000, inching closer to the psychological $100,000 milestone.
"Inflows into ETH ETFs appear to be slowing after a recent surge, and the token's failure to break above $3,700 may signal a potential pullback. BTC ETFs, on the other hand, continue to attract inflows as the crypto edges closer to the critical $100K mark," BRN analyst Valentin Fournier said in a note on Wendesday.
However, inflows into ETH ETFs appear to be slowing after a recent surge, and the token's failure to break above $3,700 may signal a potential pullback. BTC ETFs, on the other hand, continue to attract inflows as the crypto edges closer to the critical $100K mark.
— BRN (@thebrn_co) December 3, 2024
Elsewhere
Blockcast
In this episode, Takatoshi Shibayama sits down with Jason Choi, general partner at crypto prop shop Tangent, for a candid exploration of crypto markets. Choi discusses meme coin supercycles, navigating macroeconomic headwinds, and the evolution of project evaluation from speculative hype to real-world traction.
Previous episodes of Blockcast can be found on Podpage, with guests like Peter Hui (Moongate), Luca Prosperi (M^0), Charles Hoskinson (Cardano), Aneirin Flynn (Failsafe), and Yat Siu (Animoca Brands) on our most recent shows.
Events
BRN on Money FM (Singapore, 4 December 5:10pm)
BRN analyst Valentin Fournier will be going LIVE with Hongbin Jeong on Money FM Singapore's "The Wealth Tracker" to discuss where Bitcoin is headed.
Tune in here at 5:10 pm on 4 December!
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