Weekly Update: 7th of August
What happened between the 31st of July and the 7th of August?
- In fear of a possible US recession, financial markets and digital assets experienced a historical selloff, the digital assets market lost over 25% of its market capitalization and witnessed over $1 billion in liquidation losses. Read more
- Digital asset manager Grayscale launches its mini Bitcoin ETF on the New York Stock Exchange Arca, introducing a lower fee financial instrument compared to its GBTC counterpart. Read more
- The Ethereum spot ETFs struggled to find upward momentum as outflows surpassed inflows. Read more
- Morgan Stanley will soon allow its financial advisors to start recommending to embrace BlackRock and Fidelity Bitcoin ETFs to eligible clients. Read more
Financial markets experience historic selloff
On July 31st, the Federal Reserve announced it would maintain its current interest rate of 5.50%, while other central banks, such as the Bank of England and the European Central Bank, began cutting rates. Financial markets were initially stable, but this changed with the release of economic figures on August 1st and 2nd. Indicators like the unemployment rate, ISM manufacturing PMI, and non-farm employment suggested the U.S. might be heading toward a recession, raising concerns that the Fed is behind the curve in easing rates. This caused global financial markets to decline, with the digital assets market losing over 25% of its market capitalization from August 1st. While markets began to rebound on August 6th, it remains uncertain whether the worst is over or if this is just a temporary respite. If you wish to read more about these developments, read our extensive market update through this link.
Grayscale launches second Bitcoin spot ETF
In January, the market saw the introduction of nine Bitcoin spot ETFs, with Grayscale standing out due to its over 600,000 Bitcoin at launch after converting its trust into an ETF. However, it also drew negative attention for its 1.50% fee, seven times higher than the average of its competitors, resulting in a 55% loss of its Bitcoin assets in just seven months. To become more competitive, on July 31st, Grayscale launched the Grayscale Bitcoin Mini Trust (BTC) with a 0.15% fee, the lowest among all U.S. Bitcoin ETFs. The ETF launched with substantial starting capital, as 10% of GBTC was allocated to the fund, benefiting GBTC investors. The results have been positive, with no net outflows and over $241 million in net inflows.
Ether ETF market disappoints
On July 23rd, the market witnessed the introduction of a second digital asset to U.S. financial markets through the trading of nine Ether spot ETFs. The market eagerly anticipated the first trading day, and it did not disappoint, achieving a net inflow of approximately $106 million. However, in the following nine trading days, the ETFs experienced only three days of net inflow, resulting in a total outflow of approximately $462 million. While most of this negative performance can be attributed to the risk-off approach of investors due to worsening market conditions and Grayscale’s high fees on the current largest Ether ETF, the market had expected more. However, Bitcoin ETFs also experienced a slow start. If market conditions improve or remain stable, we expect these instruments to slowly gain momentum.
Morgan Stanley can start recommending Bitcoin ETFs
According to a CNBC report, starting the 7th of August, Morgan Stanley wealth managers can start advising eligible clients on two Bitcoin spot ETFs: BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC). This is a historic milestone as financial advisory firms have been quite hesitant to advise on new financial instruments, setting a high bar for approval. For now, these wealth managers will focus on BlackRock and Fidelity’s ETFs, which are emerging as the so-called “blue-chip” instruments. Both ETFs have experienced the most net inflow since their launch and already have an excellent reputation. Furthermore, as these wealth managers are now allowed to recommend these ETFs, the market might see increased inflows into these instruments.
In other digital assets news
- BlackRock’s tokenized investment BUIDL fund, operating on the Ethereum blockchain has paid $7M in dividends since its launch in March 2024, it has also amassed over $500 million in assets.
- According to its latest filings, Capula Management, Europe’s fourth-largest hedge fund with $30 billion in assets under management, has invested nearly $500 million in BlackRock and Fidelity’s Bitcoin ETFs.
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