US Bitcoin ETFs Attract $390 Million in Four Days of Gains

BlackRock’s IBIT led the inflows. Ethereum ETFs also recorded net gains, which was driven by BlackRock’s ETHA. Meanwhile, the SEC postponed decisions on options trading for Ethereum ETFs and granted BNY Mellon clearance to offer crypto custody services by bypassing controversial crypto accounting rules. Meanwhile, Coinbase recently faced scrutiny over its custodial practices, but CEO Brian Armstrong assured the crypto community that all transactions are securely settled on-chain.

Bitcoin ETFs Continue Positive Run

Spot Bitcoin exchange-traded funds (ETFs) in the US recorded net inflows of $135.95 million on Tuesday. This made it the fourth consecutive day of positive movement. Over the past four days, a total of $390 million has flowed into the 12 Bitcoin ETFs. 

BlackRock’s IBIT led the pack in terms of inflows, as it attracted $98.89 million on Tuesday. This was its highest since Aug. 26, according to data from SoSoValue. Bitwise’s BITB followed with $17.41 million in net inflows, while Fidelity’s FBTC recorded $16.80 million. Grayscale’s Bitcoin Mini Trust also reported $2.85 million in net inflows. 

Bitcoin ETF flows (Source: Farside Investors)

There were no net outflows from any of the funds, although eight ETFs, including Grayscale’s GBTC, registered no activity. The total daily trade volume for US Bitcoin ETFs reached $1.11 billion on Tuesday, which contributed to a cumulative net inflow of $17.83 billion since their inception in January.

Spot Ether ETFs also saw a return to positive daily flows on Tuesday, and recorded $62.51 million in net inflows. This followed a net outflow of $79 million on Monday, which was the largest outflow since July 29. 

BlackRock’s ETHA led the inflows with $59.25 million, while VanEck’s ETHV and Invesco’s Ether ETF saw $1.94 million and $1.32 million in inflows, respectively. The other six Ether ETFs did not register any movement on Tuesday. The total daily trade volume for Ether ETFs rose to $180.42 million from $167.35 million the previous day. 

Ethereum ETF flows (Source: Farside Investors)

Despite the positive performance, US Ethereum ETFs have accumulated negative flows of $624.17 million since their launch in July.

Ethereum ETF Options Decision Postponed by SEC

Although spot Bitcoin and Ethereum ETFs are picking up some steam, the US Securities and Exchange Commission (SEC) is dragging its feet with regards to options trading. The SEC delayed its decision on Nasdaq’s proposed rule change regarding the listing and trading of options on BlackRock and Bitwise’s spot Ethereum ETFs. The original decision date was set for this Thursday, but the ruling has been postponed to Nov. 10, according to the SEC’s announcement on Tuesday. The SEC stated that it needs more time to consider the proposal.

In a separate release, the SEC also postponed a decision on NYSE American’s proposal to list and trade options on Bitwise’s spot Ethereum ETFs, as well as Grayscale’s Ethereum Trust and Ethereum Mini Trust. The new deadline for this decision has been set for Nov. 11.

The Nasdaq International Securities Exchange filed the proposal on Aug. 6, to make Ethereum ETFs more accessible to both retail and institutional investors by simplifying the process of investing in ether. According to the proposal, the fund’s design removes the complexities and operational burdens associated with direct ETH investments while maintaining exposure to the cryptocurrency’s intrinsic value.

The postponement was announced not very long after the SEC’s recent approval of options trading for BlackRock’s iShares Bitcoin Trust (IBIT). Data from SoSoValue shows that BlackRock’s Ethereum fund, ETHA, holds net assets worth close to $977 million, and still leads the nine ether ETFs with a total net inflow of $1.10 billion. 

BNY Gets SEC Green Light for Crypto Custody

Meanwhile, the Bank of New York Mellon (BNY) is moving forward with plans to provide custody services for Bitcoin and Ethereum ETFs after receiving clearance from the SEC to bypass controversial crypto accounting guidelines. According to Bloomberg, the SEC’s Office of the Chief Accountant reviewed the situation and determined that BNY does not need to adhere to the SEC’s Staff Accounting Bulletin (SAB) 121, which mandates that companies holding client crypto assets list them as liabilities. 

This requirement was introduced in April of 2022, and has caused a lot of challenges for the US crypto industry.

The SEC indicated that other financial institutions might also receive similar exemptions. A spokesperson explained that certain brokers and custody banks have proved that their circumstances differ from those described in SAB 121. This allows them to treat their balance sheets similar to traditional custody arrangements. However, BNY will need authorization from other regulators before offering crypto custody services at scale, according to its statement to Bloomberg.

SAB 121 has been a very touchy issue since its introduction, with Coinbase’s Q1 2022 financial report sparking speculation about the company’s financial stability after it implemented the new accounting rule. In June of 2022, politicians also criticized the guideline as “regulation disguised as staff guidance.”

Pro-crypto Senator Cynthia Lummis urged the Government Accountability Office to review SAB 121 under the Congressional Review Act. Although legislation was passed to reverse the rule in May of 2023, President Joe Biden vetoed the bill in June, leaving the guidance in place.

Coinbase Defends Bitcoin ETF Custody

BlackRock has filed an amendment for its Bitcoin ETF amid rising concerns over Coinbase’s on-chain settlement practices. In a filing with the SEC on Sept. 16, BlackRock introduced a requirement that Bitcoin withdrawals from the ETF’s custodian, Coinbase, must be completed within 12 hours of an instruction from clients or their authorized representatives. The amendment addresses serious investor concerns about Coinbase’s custodial practices, and demands proof of the Bitcoin bought for the ETFs.

Coinbase serves as the custodian for 10 of 11 spot Bitcoin ETFs and eight of the nine recently approved Ethereum ETFs in the US. Despite the institutional inflows into Bitcoin ETFs, BTC’s price has stagnated over the past three months. This sparked some concerns that Coinbase might be buying “paper BTC” or Bitcoin IOUs for ETF issuers, which some believe is suppressing Bitcoin’s price. 

Coinbase co-founder and CEO Brian Armstrong responded to these concerns, and assured people that all ETF transactions are settled on-chain. He also stated that audits are conducted annually by Deloitte, and while ETF addresses aren’t publicly shared, the process ensures the security of institutional clients’ holdings.

Investor concerns intensified in August when Coinbase teased the development of a new Wrapped Bitcoin (wBTC), dubbed Coinbase BTC (cbBTC). However, analysts argued that Bitcoin ETFs are not responsible for the cryptocurrency’s recent price slump. Eric Balchunas, senior ETF analyst at Bloomberg, pointed out that native Bitcoin holders, not ETFs, are likely behind the selloff, suggesting that ETFs have actually helped stabilize Bitcoin’s price.