The Bitcoin ETF launch has been an unparalleled success in the ETF landscape, outshining every ETF since the debut of SPY in 1993. Among the nine trading Bitcoin ETF products, BlackRock’s IBIT surged past the $10B AUM mark faster than any other ETF in history. Considering the universe of approximately 3,400 ETFs, only 152 have achieved this milestone.
The combined nine Bitcoin ETFs acquired 146,000 bitcoin since January 11th. The week of February 26th witnessed $22B in traded volume — equivalent to the entire previous month condensed into five days. Wealth management platforms at Merrill Lynch and Wells Fargo are now offering clients access to spot Bitcoin ETFs. The magnitude of demand is without precedent.
Why the Bitcoin ETF category will become the most substantial ETF asset class
The reason is simple: Bitcoin outmatches any underlying asset of previous ETFs, thanks to its absolute fixed supply and universal appeal. Its primary competitors — SPY, GLD, BOND, NDX — are each comprised of underlying assets that are inflationary in nature. When billions are invested in SPY, it inflates the stock prices of the underlying assets. When companies have inflated stock prices, they often issue additional equity, which dilutes the value of your ownership. Bitcoin’s supply is finite. It doesn’t matter how much demand there is or how high the price rises — the supply issuance will not change.
Investors will eventually recognize that a Bitcoin ETF isn’t just a premier financial product — it’s a better risk-adjusted investment than stocks of any individual company. The majority of companies struggle to grow their cash flows at a rate that outpaces long-term inflation. Companies often rely on buybacks, dividends, acquisitions, and debt to propel earnings per share, but such strategies introduce additional risk. Bitcoin is unfettered by the risks that plague conventional companies — labor disputes, managerial missteps, competitive pressures, geopolitical tensions — and has provable finite scarcity.
The supply-demand dynamic
Bitcoin’s total supply is fixed at 21 million, with new coins minted through mining. This reward diminishes by half roughly every four years during an event called the halving. Following the April 2024 halving, new issuance dropped to an average of 450 BTC per day. The appetite for Bitcoin far outstrips its daily creation rate — in February, Bitcoin ETFs absorbed more than 12 times the daily new Bitcoin issuance on multiple days.
The approval of the ETF and its success represents yet another event in the gradual proliferation and mainstreaming of Bitcoin. Its adoption, as is the case with every disruptive technology before it, is a function not of the time it takes people to notice that it is superior, but rather the time it takes existing structures of the economy to re-architect themselves to accommodate it. The ETF is a real-time example of this process. The re-architecture will not be limited to investment products. Over the decades to come, every economic system and economic entity will adapt to accommodate the powerful properties of Bitcoin.