Assessing bitcoin’s “IPO”

Token holders haven’t really benefited from early trading in U.S.-listed bitcoin funds. But that’s OK.

Peter A. McKay
3 min readJan 14, 2024
Entrepreneurs Tyler and Cameron Winklevoss sparked a decade-long battle in July 2013, when they proposed offering a U.S.-listed fund holding bitcoin. Regulators rejected their idea, but 11 other issuers finally won approval for such funds on Wednesday. Photo by Noam Galai/Getty Images for TechCrunch via Wikimedia Commons under Creative Commons license

At long last, U.S. investors can bet on bitcoin via their traditional investment accounts with stockbrokers.

Yay?

Frankly, Thursday’s long-awaited launch of trading in 11 exchange-traded funds that hold bitcoin on investors’ behalf didn’t go exactly as expected.

To help understand the good, the bad, and the inbetween of the situation, I think it’s helpful to use a metaphor proposed recently by Raoul Pal, a former Goldman Sachs executive, early bitcoin investor, and founder of the Real Vision media platform.

He likens people who bought bitcoin pre-2024 to the seed investors in a tech startup. Or Series A investors, or Series B, or whatever, depending on when they got in. (Full disclosure: I own bitcoin and would certainly include myself in this category.) Now the ETF launch is akin to a startup’s initial public offering, when smaller public investors get involved via Wall Street’s trading venues.

If we take the IPO metaphor a little further, though, we get to one disappointing aspect of the new bitcoin funds: Heading into Monday’s trading session on Wall Street, bitcoin’s token price is down about 5% compared to midday Wednesday, shortly before the Securities and Exchange Commission announced its approval of the new ETFs.

In other words, owners of so-called spot bitcoin — the actual token — haven’t really benefited from the ETF launch yet. In a traditional IPO, which is supposed to produce a profit for early-stage investors, that might be considered a “busted” offering.

That said, there are still reasons for hope over the longer term. For starters, bitcoin’s 155% rally in 2023 was driven largely by anticipation of the ETFs. So we might dismiss the last couple days’ selling as a bit of harmless profit taking.

The new funds also saw solid trading volume, including $4.6 billion in turnover the first day. So at least investors aren’t ignoring them altogether. That might truly have been the worst-case scenario.

Bitcoin bulls are hoping that attention could could turn into buying later. Analysts forecast there could be up to $100 billion of new money allocated to bitcoin this year via ETFs, according to Reuters.

Also notable: Because of the public nature of prices on the Bitcoin network, the launch of bitcoin ETFs was arguably orders of magnitude more transparent before, during, and after the offerings than a conventional IPO would have been. By comparison, early venture funding of startups, valuations of such companies, and pre-IPO underwriting are some of the most opaque processes that exist in any corner of the financial world.

Over time, I think it will also be fascinating to see how the twin cultures of early bitcoin adopters and Wall Streeters continue to interact, clash, and evolve.

Bitcoin’s famously pseudonymous founder Satoshi Nakamoto explicitly designed his creation as an antidote to centralized finance. By that standard, does it really make sense to rejoice over a listing, pegged to bitcoin, on the NYSE or Nasdaq?

Pal, who knows both cultures as well as anyone, addressed this tension in an interview with the Crypto Banter podcast. Referring to SEC Chair Gary Gensler, a frequent crypto foe who reluctantly voted in favor of ETF approval, Pal said:

“You can either take it as, ‘Well, Gary’s won and we kind of put it (bitcoin) inside Wall Street’s walls.’ Or: We put the Trojan horse inside of Wall Street. I’ll go with the latter.”

This post was adapted from my free email newsletter #Web3Weekly. To get the full version in your inbox every Sunday, including additional headlines about decentralization from around the internet, please subscribe here.

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Peter A. McKay

I publish #w3w, a newsletter about decentralization. Former Head of Content & Writer Development at Capsule Social. Other priors: WSJ, Washington Post, Vice.