1/19/2024

Spot Bitcoin ETFs raised almost $2 billion

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Key points:

  • The new US Bitcoin ETFs attracted significant interest from investors, who poured $1.9 billion into them in the first three days of trading.
  • Most of the flows come from BlackRock and Fidelity funds, which offer lower fees and have more brand recognition.
  • Some analysts believe that flows into Bitcoin ETFs could reach $50 billion to $100 billion by the end of the year.

The long-awaited debut of US Bitcoin ETFs has sparked significant investor interest, prompting a surge in capital inflows. Data from issuers and analysts reveals that a remarkable $1.9 billion poured into nine new spot-price-tracking Bitcoin ETFs within the first three days of trading. This initial momentum, driven primarily by BlackRock and Fidelity, raises questions about the sustainability of such inflows in the coming weeks.

Market observers remain cautious, highlighting the inherent volatility of Bitcoin and its potential impact on attracting both retail and institutional investors. While some optimistic analysts predict potential inflows of $50 billion to $100 billion by year’s end.

However, the recent price correction of Bitcoin itself adds a layer of uncertainty. After a period of ascent in anticipation of ETF approval, the cryptocurrency has experienced a significant decline exceeding 8% since January 11th.

What attracts investors?

In the US Bitcoin ETF market, two key factors are attracting investor dollars: attractive fee structures and the allure of established brand names. Asset management giant BlackRock’s iShares Bitcoin Trust ETF has garnered over $700 million, while Fidelity’s Wise Origin Bitcoin fund has surpassed $500 million.

Fees across the nine issuers vary, offering investors a spectrum of cost options. The most competitive rate dips to 0.19%, while the highest reaches 0.39%. BlackRock, recognizing the initial appeal of lower fees, has implemented a tiered structure: 0.12% for the first $5 billion in assets and the first year, followed by a 0.25% increase thereafter. Similarly, Fidelity is offering a temporary perk of zero fees until July 31st, after which the standard 0.25% applies. Notably, even at their full rates, these remain significantly lower than the average ETF fee of 0.54%, as calculated by Morningstar Inc.

Barriers for companies

While BlackRock and Fidelity are currently leading the charge in terms of investor inflows for US Bitcoin ETFs, other established brands are hot on their heels. Bitwise, known for its crypto indices, raked in $305.5 million within the first three days, while the Ark/21Shares collaboration attracted nearly $230 million.

However, not all players are enjoying sunshine. The Grayscale Bitcoin Trust, burdened by a higher 1.5% fee, has faced outflows this month. Notably, it transitioned to an ETF alongside the new batch, but saw a sizeable $1.16 billion exit in its initial trading days. This stark contrast highlights the sensitivity of investors to fees in this nascent market.

The next major challenge for these funds lies in securing the backing of institutional investors like pension funds and investment advisors.

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