What happened with the ETFs?
The bitcoin ETFs have been spectacularly successful, much more so than is indicated by the price.
The ETFs have collectively bought up 400,000 bitcoin in the past two months.* That’s 400,000 bitcoin that would not have otherwise been purchased. As you can see below, BlackRock (IBIT) is the biggest buyer with ~200,000 bitcoin totalling about $10 billion worth of purchases, becoming the fastest ETF in history to reach the $10 billion mark. Fidelity (FBTC) is second with 125,000 bitcoin at about $6 billion.
And of course, the bitcoin price is at its all time high, having increased $21,000 per coin, or 45%, since the ETF approval.
Here are my key takeaways:
1- This explosion in the amount of buying has not been reflected in the price because there has also been an explosion in the amount of selling. Rather than descend into the minutia of who these sellers are (GBTC holders, bankruptcy liquidations from FTX and Gemini Earn, and retail investors who bought at the last all time high and are now cashing out), the important thing to keep in mind is that this massive selling is indeed massive (many billions of dollars worth of bitcoin) and temporary (once these bankruptcies are cleared, the selloff is done.) Basically, in a few weeks, it’s likely that there will not be any selling to offset the increased buying from the ETFs.
2- The pace of buying from the ETFs is increasing. We can see this if we just look at BlackRock’s IBIT.
In the first 20 trading days, BlackRock sucked up 77,000 bitcoin. In the last 20 days, BlackRock sucked up 114,000 bitcoin.
3- There are several reasons to think that the pace will increase even further:
1- Financial advisors are not recommending bitcoin. None of the wirehouses (broker-dealers like Morgan Stanley, Merrill Lynch, Goldman Sachs) are currently offering the ETFs on their platforms.
2- BlackRock and Fidelity and the other ETFs haven’t yet trained up their advisors to pitch the ETFs. The advisors need to learn what bitcoin is, why it belongs in a portfolio, and how to explain that to their clients.
3- Options trading has not yet been authorized, the next decision point is late April. Several firms have already submitted applications.
4- The bitcoin price is the best advertisement for the value of the ETF, and if it continues to rise as the selling abates, this will attract more buyers.
4- Supply and demand drive the price, and we’re seeing an explosion in demand. We’re also seeing an explosion in supply from the selling, albeit a smaller explosion. If new bitcoin from sellers matches bitcoin taken off the market by buyers, the price stays flat. As the selling tapers off, the impact on the price from new buying is amplified.
At the same time that selling will be easing, the new supply from mining will cut in half. Currently, 900 new coins are produced every day. Around April 20, that drops to 450 per day.
That’s all I have to say right now.