Bitcoin's Wall Street debut sparks investor interest

Bitcoin marked its 15th birthday this month with an entry onto Wall Street through the launch of 11 US exchange-traded funds (ETFs) tracking its spot price. Since their regulatory approval on January 11, these ETFs have garnered immense investor interest, holding a total of 644,860 bitcoins valued at over $27 billion after just two trading days, as per Glassnode data.

The majority of these holdings, over 500,000 bitcoins, were already part of the Grayscale Bitcoin Trust, which transitioned from a closed-end fund to one of the new ETFs. Inflows into these ETFs since January 11 have reached $4.1 billion, according to CoinShares data.

The arrival of the world's largest cryptocurrency on the world's largest stock market is seen as a crucial step in Bitcoin's maturation. Glassnode suggests that the move marks "the end of the beginning" for Bitcoin, indicating a transition into a more mature and established phase. Many market players anticipate that increased liquidity from these ETFs will contribute to taming Bitcoin's notorious volatility over time.

Brent Donnelly, a currency trader and president of Spectra Markets, views this as a natural evolution for Bitcoin, stating, "This is a logical, nearly-inevitable evolution as a newborn security with a wildly uncertain value and price matures into a mainstream asset with a million punters punting."

The total daily value of Bitcoin traded on cryptocurrency exchanges averages around $500 million, but the US spot Bitcoin ETFs recorded $4.6 billion in volume on their first trading day, highlighting the potential impact of Wall Street on Bitcoin's liquidity.

Despite the initial excitement, market participants caution that it's too early to determine whether these new Bitcoin investment products will sustain long-term investor interest. However, the 644,860 bitcoins held by the 11 US ETFs after just two trading days represent approximately 30 per cent of all global spot Bitcoin ETF holdings, according to Glassnode data.

The approval of Bitcoin ETFs, anticipated for a long time, has led to a 50 per cent rally in Bitcoin prices since mid-October. However, the cryptocurrency faced some selling pressure after hitting a two-year peak of $49,033 post-ETF approval, currently trading around $40,267, about 40 per cent below its all-time peak.

Market observers are also noting movements among Bitcoin whales, as long-term holders (those holding for at least six months) have decreased their supply by about 75,000 bitcoins since November, possibly to realise profits. On average, long-term Bitcoin holders are sitting on a 55 per cent unrealised profit, indicating potential profit-taking strategies.

As the Bitcoin market continues to evolve with Wall Street's involvement, attention remains on potential derivative products and the impact of US ETF flows on Bitcoin's price dynamics. Analysts believe that the US trading session will play a significant role in influencing Bitcoin's near-term price action.

(With Reuters inputs)