Bitcoin ETFs One Year On

The January 2024 Bitcoin ETF approvals were described as a watershed. A year of data lets us say something more specific.

The inflows were extraordinary. The eleven approved ETFs accumulated over $50 billion in assets in their first year — the fastest ETF launch in history by a significant margin. For context, gold ETFs took five years to reach the same figure.

The buyers were different from typical Bitcoin buyers. Surveys show older, wealthier investors — retirement account holders, financial advisor clients, institutional allocators — groups that couldn’t easily access Bitcoin before. The friction of cryptocurrency exchanges, private keys, and seed phrases had kept them out. A button on their existing brokerage account removed that friction.

Price impact was real but hard to isolate. Bitcoin reached all-time highs above $100,000 in the months after ETF approval. The halving happened in April. Macro conditions were supportive. ETF inflows provided steady ongoing demand that previous cycles didn’t have. How much of the price move was ETFs versus the halving versus broader market conditions is genuinely hard to separate.

The less discussed side: concentration. BlackRock’s ETF custodies its Bitcoin through Coinbase. Around 90% of ETF Bitcoin sits with a handful of custodians. This represents meaningful centralisation in a network designed to resist it.

Both things are true simultaneously. The ETF approval brought enormous new capital into Bitcoin and made it genuinely accessible to a new category of buyer. And it created centralisation risks that longtime Bitcoin holders are right to notice.

Tomorrow: BlackRock and Bitcoin — what it means when the world’s largest asset manager is in.

— The Daily Bit