BlackRock is leading inflows into its bitcoin ETFs after about a week of trading, as investors weigh a group of similar ETFs that all launched on the same day.
“It’s very clear that BlackRock is off to a very strong start,” Aniket Ullal, head of ETF data and analytics at CFRA Research, said in a phone interview on Friday. He said the company’s iShares Bitcoin Trust IBIT has already attracted more than $1 billion in inflows, since it began trading on January 11 along with nine other bitcoin ETFs launched on the same day.
“We are excited to see strong early client demand for IBIT, especially within both the end-investor and advisor communities,” Jay Jacobs, head of U.S. thematic and active equity ETFs, said in an email comment.
The Fidelity Wise Origin Bitcoin Fund FBTC had the largest inflows among spot bitcoin ETFs as of January 18, taking in more than $600 million, according to CFRA data. But Ullal notes that the Grayscale Bitcoin Trust ETF GBTC has the most assets under management so far, about $23.7 billion as of January 18, after converting to an ETF from an already large fund.
“Grayscale has seen some outflows, but it’s actually not that bad considering the size of the fund,” Ullal said.
After the SEC approved 11 bitcoin ETFs, it was a “highly unusual situation” to see 10 of those funds all launch on the same day with the same underlying assets, Ullal said. The funds are “virtually identical.”
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Ullal noted that of the 11 bitcoin ETFs approved by the SEC, two of them — Grayscale Bitcoin Trust ETF and Hashdex Bitcoin Futures ETF DEFI — were conversions from existing funds. He said that the Hashdex fund has not yet turned into a spot bitcoin investment fund.
Ullal looked at the top 10 U.S. cryptocurrency ETFs by assets, including those that provide exposure to spot bitcoin (BTCUSD),
Prices as well as futures contracts.
CFRA research, flows based on shares outstanding as reported by issuers for January. 18, 2024
Ullal said he expects the “excitement around the initial launch” of the new spot bitcoin ETFs will be followed by a “longer grind” of building the assets over time. While smaller funds “may face some pressure,” he said he would be “surprised” to see one close in the first year.
| Spot Bitcoin ETFs | Flows since the beginning of the year ($ million) | Origins |
|
iShares Bitcoin Trust (IBIT) |
1,052 |
1,026 |
|
Fidelity Wise Origin Bitcoin Fund (FBTC) |
637 |
839 |
|
Bitwise Bitcoin ETF (BITB) |
378 |
360 |
|
ARK 21 Shares Bitcoin ETF (ARKB) |
254 |
310 |
|
Invesco Galaxy Bitcoin ETF (BTCO) |
115 |
131 |
|
Valkyrie Bitcoin Fund (BRRR) |
64 |
61 |
|
Van Eck Bitcoin Trust (HODL) |
22 |
88 |
|
Wisdom Tree Bitcoin Fund (BTCW) |
2 |
5 |
|
Franklin Bitcoin ETF (EZBC) |
1 |
47 |
|
Gray Bitcoin Trust Mutual Fund (GBTC) |
-1,598 |
23,708 |
|
Source: CFRA data as of January 18, 2024 |
“They all started with seed capital,” Ullal said.
“Whichever way we look at this, it confirms our view that Bitcoin ETFs are off to a flying start,” AllianceBernstein analysts Gautam Chugani and Mahika Sapra wrote in a recent note.
The 10 Bitcoin ETFs saw a total trading volume of $16.6 billion in their first six trading days as of Friday, according to FactSet and Dow Jones Market Data.
GBTC outflows
Meanwhile, investors are weighing the costs of new Bitcoin ETFs and some traders may have already made profits from Grayscale’s fund.
JPMorgan Chase & Co. analysts led by Nikolaos Panigirzoglou said in a Jan. 11 research note that they expect about $3 billion to exit GBTC, due to investors taking profits after purchasing “deeply discounted” shares on the secondary market over the past year.
GBTC launched in 2013 as a private, open-ended trust fund for accredited investors and began trading publicly in 2015. While the fund initially traded at a premium to its net asset value, or the value of the bitcoin it holds, it flipped higher. Discount in 2021.
The discount didn’t go away until the SEC finally approved Grayscale’s request to turn the fund into an ETF. Compared to closed-end funds, ETFs have a unique structure that allows certain financial institutions, known as authorized participants, to create and redeem shares, keeping the value of the funds in line with the value of the assets they hold.
Now, while GBTC is trading as an ETF, “those early investors finally have a chance to cash in,” according to a Friday note from James Hart, an analyst at TickMill Group.
JPMorgan analysts had expected that Grayscale’s higher management fees could lead to additional GBTC outflows of $5 billion to $10 billion as investors look for cheaper alternatives, according to their note.
GBTC charges a management fee of up to 1.5%, while most other Bitcoin ETFs have fees ranging from 0.2% to 0.4%.
But Grayscale Investments CEO Michael Sonnenshein defended GBTC’s high fees, noting that it is the largest bitcoin fund, has a multi-year track record and a diverse investor base, according to a CNBC report on Friday.
“Investors weigh heavily on things like liquidity, track record and who is the actual source behind the product,” Sonnenshein told CNBC at the World Economic Forum in Davos. “Grayscale is a specialist in cryptocurrencies. It has really paved the way for a lot of these products to arrive.
Sonnenshein told CNBC that other bitcoin ETFs don’t have a great track record and that issuers use lower fees as an incentive to attract investors.
Grayscale’s spot Bitcoin ETF rose 2% on Friday, FactSet data showed. Bitcoin rose 0.5% over the past 24 hours to about $41,500 on Friday evening, according to CoinDesk data.
“GBTC has seen a significant decline in funds, with money coming out of that. The flows into BlackRock and Fidelity are kind of offsetting that,” Akbar Thobani, CEO of sFOX, said in a phone interview with MarketWatch. “And so you see a shift in capital moving around.” From one to another.”