Bitcoin exchange-traded products (ETPs), which provide exposure to or track the price of Bitcoin (BTC), now hold more than a million BTC globally. They are collectively worth almost $68 billion. This value includes 32 Bitcoin ETPs worldwide: 11 spot Bitcoin ETPs launched in January in the US and 21 in other countries.
This significant increase in Bitcoin ETP holdings could potentially open up new opportunities for retail traders, offering them a chance to benefit from the growing Bitcoin market.
The largest Bitcoin holder is Grayscale’s GBTC, with Bitcoin worth approximately $19.9 billion. BlackRock’s iShares Bitcoin Trust is a close second with around $19.8 billion.
Meanwhile, the first Bitcoin ETPs started trading on the London Stock Exchange after being approved by the local regulator, the Financial Conduct Authority. Asset managers 21Shares and WisdomTree listed Bitcoin ETPs on the LSE on May 28. Under FCA rules, these products are accessible only to professional investors.
According to Alex Pollak, 21Shares’ head in the UK, lifting the retail ban will “change the game.” Retail investors aren’t allowed to trade Bitcoin and Ethereum ETFs at the moment.
Impact of Bitcoin ETPs on Retail Investors
ETPs are traded on major exchanges, making them relatively liquid. Retail traders can buy and sell shares throughout the trading day at market prices, which provides flexibility. They can also react quickly to market movements.
On the downside, the consistent rise of BTC in exchange-traded funds (ETFs) raises questions about the impact on self-custody growth. Many Bitcoin addresses are inactive. However, similar stagnant periods were observed during the last crypto market bull run in 2017. Just one million addresses currently hold one or more BTC, suggesting that retail traders account for the majority of ETP activity and value.
The impact on retail traders also depends on market volatility. Institutional investors are highly skilled and possess in-depth knowledge of trading. They can withstand market volatility more easily and even profit from it. On the other hand, price volatility can harm retail traders, who only rely on basic trading platforms and limited, publicly available information.
The jurisdiction of the retail traders is also a factor, with the US holding the lion’s share of the Bitcoin ETP market - around 83%.
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