Bloomberg has reported that BlackRock’s iShares Bitcoin Trust (IBIT) has clocked an unprecedented $10 billion in cumulative trading volume, a figure that arrived precisely as Bitcoin (BTC) experienced a violent “flash crash” soon after touching a high. The development is paradoxical: while the Bitcoin price plummeted by nearly 10%, the spot Bitcoin ETF market reached a fever pitch.
The $10 billion daily volume record is more than double the previous high of approximately $4.66 billion set during the ETFs’ inaugural trading day on January 11. BlackRock’s IBIT was the highest contributor; it alone accounted for roughly $3.8 billion of the total turnover. Fidelity’s Wise Origin Bitcoin Fund (FBTC) followed suit, posting nearly $1.9 billion in volume, while the ARK 21Shares Bitcoin ETF (ARKB) and Bitwise Bitcoin ETF (BITB) also showcased significant participation.
According to Eric Balchunas, a senior ETF analyst at Bloomberg, these numbers are “absurd” because for a nascent asset class, these levels of liquidity are typically reserved for the most established index trackers like the SPY (S&P 500) or QQQ (Nasdaq 100). The recorded massive trading volume suggests that the ETF structure is performing its primary role of providing a robust, liquid gateway for investors to enter and exit the market during periods of extreme price volatility.
The Paradoxical Price Activity of Bitcoin
The $10 billion ETF’s daily volume was fueled by a dramatic drop in the Bitcoin price, which seemed quite paradoxical. Initially, Bitcoin surged past its November 2021 peak of $68,990, briefly touching $69,200 on several cryptocurrency exchanges. The euphoria, however, was short-lived as a massive wave of profit-taking and liquidation of leveraged long positions triggered a swift U-turn for the currency.
Bitcoin fell back to as low as $59,300 in a matter of hours, wiping out hundreds of millions of dollars in open interest. Unlike in traditional finance, in ETFs, a high volume during the price drop indicates a mix of frantic selling and aggressive “buy-the-dip” behavior from institutional players who have been waiting for a correction to consolidate their positions.
BlackRock’s Role in Liquidity Provision
BlackRock’s role in Bitcoin’s liquidity provision has been seminal in this period of trouble for the currency. BlackRock’s role in allowing RIAs (Registered Investment Advisors) and institutional desks to engage with Bitcoin without the complexities of managing private keys or dealing directly with unregulated cryptocurrency exchanges is commendable.
Unlike the 2021 Bitcoin crash, where liquidity often dried up on centralized exchanges, leading to massive slippage, the presence of authorized participants (APs) in the ETF ecosystem ensured that the funds traded close to their Net Asset Value (NAV).
BlackRock’s ETF has proved to be more profitable than that of Grayscale. While IBIT and FBTC saw massive inflows, the Grayscale Bitcoin Trust (GBTC) continued to see significant outflows, totaling hundreds of millions. Investors are therefore migrating from Grayscale’s higher 1.5% fee structure to the more competitive 0.25% or lower fees offered by BlackRock and its peers.
