Spot Bitcoin ETF

Abstract

Inflows to the newly-established bitcoin exchange traded funds (ETFs) surpassed $20 billion in the first several weeks of trading and are considered historic high by ETF standards. In this paper we provide early examination of the bitcoin spot ETFs listed on US exchanges, and their effect on bitcoin price formation. We establish several empirical facts: (1) daily capital flows to spot bitcoin ETFs exceed $500 million or roughly 10,000 bitcoins and surpass daily production of bitcoin by the factor of 5; (2) net flows to ETFs are a strong positive predictor of bitcoin price with R-squared of 95%; (3) most of bitcoin price appreciation is generated outside of the ETF trading hours; (4) increase in bitcoin price leads to an abnormal ETF trading volume; (5) inflows to bitcoin ETFs witness outflows from gold ETFs. Overall, during the period studied, capital flows to spot bitcoin ETFs emerge as a dominant single factor predicting positive valuation effects of bitcoin.