Last week, VanEck’s spot bitcoin ETF surprised some market observers when its daily activity exploded and the newest investment product recorded more than $400 million in trading volume, an increase of more than by 1,400% compared to the second most active exchange fund. day.
VanEck’s ETF, the HODL ticker, which saw $25.5 million in trading volume on its launch day last month, had consistently reported daily trading volumes below $10 million before the spike of 400 million dollars on February 20. During the entire last week, HODL generated positive inflows of $17 million, according to CoinShares.
So what drove hundreds of millions of dollars in trading volume if the ETF only added $17 million for the entire week?
“We noticed that a few ETFs have also experienced this in Europe. We suspect that there are quant funds that execute high-frequency intraday trades,” James Butterfill, head of research at CoinShares, told The Block, adding that “some ETFs are used for high purposes”. frequency trading, but it is generally futures contracts that are used.
VanEck Bitcoin ETF spot trading volume. Image: Block research.
Difficult to know “who or why someone buys an ETF”
In high-frequency trading, investment banks, hedge funds and institutional investors use computers – employing algorithms – to execute extremely high numbers of trades at blazing speeds.
VanEck did not immediately respond to a request for comment. But last week, the investment manager’s head of product management, Ed Lopez, told The Block: “Since ETFs trade on the secondary market, it can be difficult to know who or why someone ‘one buys an ETF.’
In total, spot Bitcoin ETFs have reported a cumulative trading volume of nearly $52 billion since they began trading last month, according to Yahoo Finance data compiled by The Block. Overall, the products have grossed $5.8 billion net since their launch, according to CoinShares.
VanEck’s HODL spot bitcoin ETF wasn’t the only one of the new instruments to see erratic trading last week. WisdomTree’s product, the BTCW ticker, also saw a staggering spike in daily activity on February 20, when it jumped to $223 million in daily trading volume. The exchange-traded fund’s previous high was $33.1 million on Feb. 1, according to Yahoo Finance data compiled by The Block.
The day after volume spikes for VanEck and WisdomTree products, they returned to trading levels consistent with their prior performance. On Feb. 21, VanEck and WisdomTree’s spot bitcoin ETFs saw trading volume of $17.4 million and $7.3 million, respectively, according to Yahoo Finance data compiled by The Block.
“SOCKET And BTCW volume returned to normal today,” Eric Balchunas, senior ETF analyst at Bloomberg. posted on on February 21. “It was just a crazy day to remember and now it’s over, it lends credence to the theory of ‘algo testing’ or some sort of arbitrage between BT ETFs/exchanges for some sort of frenzy. ‘retail purchase.’
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