Bitcoin Spot ETF First Day Trading: GBTC Trading Volume Leads, But Faces Potential Sell Pressure

The first Bitcoin Spot ETF in the United States performed strongly on its debut day, with a total trading volume of $4.6 billion, of which GBTC accounted for nearly half. However, the high trading volume of GBTC may conceal investor sell-off behavior, and the potential massive selling pressure after its upgrade to a Spot ETF has also raised concerns in the market.

From the first day of trading data, GBTC leads with a trading volume of 2.09 billion USD, far ahead of other ETF products launched by traditional financial institutions. In this regard, an ETF analyst stated that a considerable portion of these trades is likely investors selling GBTC and temporarily buying other ETFs.

It is worth noting that trading volume does not directly reflect the inflow or outflow of funds. Due to the nature of fund settlement transactions, the specific net inflow/outflow situation may not be revealed until Friday. However, the 1.5% management fee rate of GBTC is the highest among all disclosed products, which may affect its competitiveness with other rivals.

However, low fees are not necessarily the decisive factor for investors when choosing an ETF. GBTC, as a pioneer, is favored by institutional investors due to its compliance and arbitrage opportunities, and has currently become the largest Bitcoin ETF, managing approximately $46 billion in assets. Considering factors such as product liquidity, GBTC may still remain one of the top choices for investors. This is similar to the world's largest gold ETF, which did not win market share based on the lowest fees.

With GBTC upgrading to a Spot ETF, the "unlocking" of its holdings of over 620,000 Bitcoins may bring significant selling pressure to the market. This concern became particularly evident after the first day of trading for the Bitcoin Spot ETF, when the price of Bitcoin briefly surged before quickly retreating.

As a trust fund product similar to an ETF, GBTC has attracted a large number of institutional investors due to its compliance and arbitrage opportunities. According to a data platform, as of January 12, GBTC holds 624,800 Bitcoins, accounting for 3.18% of the circulating Bitcoin supply, with an average holding cost of approximately $12,800. Based on the current Bitcoin price, holders have achieved several times the return, which may lead some investors to choose to cash out immediately.

At the same time, after GBTC converts to a Spot ETF, its trading discount or premium will significantly decrease, which may prompt some unprofitable holders to seek to cash out. Data shows that as of January 10, the discount of GBTC relative to its net asset value has narrowed to -1.9%. Since February 2021, the trading price of GBTC has been below the price of the Bitcoin it holds, and it hit a historical low of nearly 50% in December 2022.

Despite the sell-off pressure, the high capital gains tax may somewhat reduce investors' willingness to exchange GBTC for Bitcoin. According to U.S. tax law, short-term capital gains are taxed at ordinary income tax rates ranging from 10% to 37%, while the maximum long-term capital gains tax rate is 20%. Bitcoin ETFs can avoid the capital gains tax associated with directly holding Bitcoin, which also means that GBTC holders may not necessarily consider transitioning to the lower-fee Bitcoin ETF.

Overall, the market landscape is no longer dominated by a single entity. The entry of traditional mainstream financial institutions has not only opened new channels for traditional capital to enter the cryptocurrency market but has also added more variables to the competition for Bitcoin Spot ETF.