#1293 James Seyffart | Bitcoin ETF APPROVED: What You Need To Know
1/10/2024 · 33 min · transcript via mlx
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Key topics
— Bitcoin spot ETF approvals represent a one-of-one situation in ETF history, with 11 issuers approved simultaneously rather than the traditional staggered approach seen in past products.
— The SEC deliberately approved multiple issuers to avoid being a "kingmaker" as it was with the Bitcoin futures ETF (ProShares BITO), which dominates the futures space with 95%+ of assets and trading volume.
— Fee compression occurred at unprecedented speed, with rates dropping from expected 40+ basis points to 20–39 bps immediately, representing a year's worth of typical fee erosion compressed into 48 hours.
— Cash-only creation and redemption (not in-kind) means issuers rather than market makers must execute Bitcoin purchases, potentially creating performance disparities based on execution quality and trading sophistication.
— Predicted first-year net inflows range from $10–25 billion, with BlackRock reportedly having $2 billion lined up and potential $2+ billion in net flows within the first 48 hours.
— Volatility dampening is expected as advisors rebalance positions back to target allocations (e.g., 5% of portfolio), creating automatic selling on rallies and buying on declines, shifting Bitcoin from an asymmetric asset to a more traditional one.
Market & price signals
— Gold ETFs are cited as the most analogous historical precedent, with $100+ billion in assets; however, projected Bitcoin ETF AUM is estimated at 1–2% of total ETF market assets (currently $8 trillion), suggesting $80–160 billion potential over four to five years rather than near-term. Fee levels are critical differentiators: iShares and Fidelity at 20–39 bps, with six-month fee waivers from Invesco/Galaxy bringing them to effectively zero initially. If Bitcoin price appreciates significantly alongside inflows (as occurred in 2021), year-one AUM could exceed current $10–25 billion estimates.
Actionable insights
— Investors should monitor fund structures and fee schedules closely over the first 30 days; despite similar products, the issuer with best execution on Bitcoin trades (likely the largest market makers) and strongest institutional distribution may see the most consistent growth and tightest spreads.
— Consider that regulatory constraints (cash-only redemptions, issuer-directed purchases, SEC oversight) will reduce the incentive for risky behavior like securities lending or performance-chasing, making spot ETFs structurally safer than unregulated custody platforms despite their lower fees.
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