A 55% surge in February has seen digital asset-based exchange traded product (ETP) assets under management hit an all-time high of $80.5bn, up from $52bn in January, according to analysis by digital asset and fintech investment business Fineqia International.
February’s increase was nearly 50% higher than the increase in the value of the underlying crypto assets, which grew slower at 37% to about $2.37tn from $1.73tn, with the premium largely credited to the approval of BTC Spot ETFs in the United States, which began trading on 11 January.
Increased capital inflows drove ETPs to their new high surpassing previous record AUM of $58.5bn seen at the end of 2021 by 38%.
Back in late 2009, The New Liberty Standard Exchange recorded the first ever exchange of bitcoin for $0.00099, about one-tenth of one cent. The currency now trades for around $67,000, something that Fineqia CEO Bundeep Singh Rangar believes traditional fund managers can’t afford to ignore.
“If you can’t beat ’em, join ’em, is the mantra,” said Rangar. “Old school fund managers risk ignoring Bitcoin’s unprecedented returns over the past 15 years at their own peril. The legitimisation of the asset via spot ETFs, likely easing of interest rates and reduced token supply are all likely to support its rising price.”
Ten new BTC Spot ETFs featuring issuers such as BlackRock, 21Shares and Grayscale attracted $7.4bn in net inflows since their inception. Grayscale Bitcoin ETF (GBTC)’s has led the pack with approximately $26.5bn in AUM. It previously traded as a Trust before being converted into an ETF when it experienced $8.9bn in outflows offsetting the total $16.3bn inflows into the new ETFs.
BlackRock’s Bitcoin ETF (IBIT) garnered $10bn in AUM over the two months to 1 March, the fastest ETF ever to reach this milestone. About $8bn was attributed to in net inflows and $2.3bn to Bitcoin’s price upswing. That implied an average daily AUM increase of almost $300m over thirty-five trading days.
By contrast, SPDR Gold Shares (GLD), the first Gold ETF that began trading in the US in November 2004, took more than two years to reach $10bn in AUM. BTC Spot ETFs seem to be driving up the price of bitcoin that’s increasingly viewed by investors as “digital gold,” unlike physical gold whose price is connected with central bank reserves and industrial demand.
“The institutional race is on and it’s driving demand,” said Rangar. “The high uptake of ETFs is causing its issuers to soak up available BTC supply in the market, driving up prices. And it looks like there might still be some more room to stretch along the price elasticity curve.”
In Feb., the price of BTC increased by 41.4%, rising to $61,250 from $43,300 at the end of January. During the same time, the AUM of ETPs with BTC as the underlying asset saw a 59.5% increase, to $60.6bn from $38.0bn recorded at the end of January. BTC-backed ETPs make up about 4.9% of the total BTC supply. The ten newly introduced BTC Spot ETFs, holding 3.9% of the supply that’s valued at $48.2bn, highlight their substantial influence on the recent market uptrend.
During February, Ethereum (ETH) rose 46.9% in value to $3,473 from $2,365 recorded at the end of January. In the same period, ETH-denominated ETPs AUM increased 46% to $14.0bn from $9.6bn on 31 January. It’s important to note that seven issuers applied for an ETH Spot ETF, and the US Securities and Exchange Commission (SEC) postponed decisions on Blackrock and Fidelity’s filings. The SEC must decide by the end of May 2024, as three filings have a final deadline that week.
ETPs representing a diversified basket of cryptocurrencies increased 41.4% in AUM during February, to $3.01bn, from $2.17bn recorded at the end of Jan.
ETPs representing an index of alternative coins increased by 27.1% in January to $2.83bn from $2.22bn recorded at the beginning of the year. Solana (SOL) remains the dominant force in this index, comprising nearly half of the alternative coins AUM. ETPs with SOL as the underlying asset experienced a 25.3% increase in AUM, to $1.26bn from $1.01bn recorded at the end of Jan.
