Written by Christine Idzelis and Frances Yue
Grayscale's newly converted Spot Bitcoin ETF sees outflows while other big companies attract assets to recently launched funds
After about a week of trading, BlackRock is leading inflows into spot Bitcoin exchange-traded funds as investors weigh a group of similar ETFs launched on the same day.
“It's clear that BlackRock is off to a pretty strong start out of the gate,” Aniket Ural, head of ETF data and analysis at CFRA Research, said in a phone interview 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 spot Bitcoin ETFs launched on the same day. He says he is collecting them.
“We are excited to see early strong demand for IBIT from our clients, particularly in both the end-investor and advisor communities,” Jay Jacobs, BlackRock's U.S. head of thematic active equity ETFs, said in emailed comments. “We are doing so,” he said in an emailed comment.
Fidelity Wise Origin Bitcoin Fund FBTC had the second-largest inflows among spot Bitcoin ETFs, attracting more than $600 million as of January 18, according to CFRA data. However, the Grayscale Bitcoin Trust ETF GBTC has the most assets under management to date, with approximately $23.7 billion as of January 18 after converting from an already large fund into an ETF. Ural said.
“Greyscale has had some outflows, but it's actually not that bad considering the size of the fund,” Ural said.
Ural said that after the Securities and Exchange Commission approved 11 spot Bitcoin ETFs, it was a “very unusual situation” for 10 of those funds to all be launched on the same day with the same underlying asset. The funds are “substantially the same.”
Read: Spot Bitcoin ETF Ticker Symbols Are Live. Here's what investors are looking for after SEC approval:
Ural noted that of the 11 Bitcoin ETFs approved by the SEC, two were conversions from existing funds: Grayscale Bitcoin Trust ETF and HashDex Bitcoin Futures ETF DEFI. He said the HashDex fund has not yet been converted into a spot Bitcoin ETF.
Ural looked at the top 10 U.S. crypto exchange-traded funds by asset, including funds that offer exposure to spot Bitcoin (BTCUSD) prices and futures contracts.
Ural said he expects the “initial launch excitement” of the new Spot Bitcoin ETF to be followed by a “longer struggle” to build the asset over time. “Small funds may face some pressure,” he said, but “I would be surprised” if a fund shut down in its first year.
Spot bitcoin ETFs YTD Flows ($M) Assets 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 VanEck Bitcoin Trust (HODL) 22 88 WisdomTree Bitcoin Fund (BTCW) 2 5 Franklin Bitcoin ETF (EZBC) 1 47 Grayscale Bitcoin Trust ETF (GBTC) -1,598 23,708 Source: CFRA data as of Jan. 18, 2024
“They all started with seed capital,” Ural said.
“No matter how you look at this, our view is that the Bitcoin Spot ETF is off to a strong start,” AllianceBernstein analysts Gautam Chughani and Mahika Sapura said in a recent note. It confirms that,” he wrote.
As of Friday, trading volume for the 10 Bitcoin spot ETFs reached $16.6 billion in the first six trading days, according to FactSet and Dow Jones Market Data.
Meanwhile, investors are weighing the costs of new Bitcoin ETFs, and some traders may already be profiting from Grayscale's funds.
JPMorgan Chase analysts led by Nikolaos Panigirtzoglou wrote in a Jan. 11 research note that GBTC has declined as investors bought “deeply discounted” stocks and booked profits in the secondary market over the past year. He said he expected the withdrawal from the deal to cost about $3 billion.
GBTC was founded in 2013 as a privately placed open-end trust for accredited investors and began trading publicly in 2015. The trust initially traded at a premium compared to its net asset value, or the value of the Bitcoin it held, but the trust price has since hit its all-time high. Discounts for 2021.
This discount did not disappear until the SEC finally approved Grayscale's application to convert 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 and match the value of the fund with the value of the assets it holds. I am.
With GBTC now trading as an ETF, “early investors finally have an opportunity to cash in,” according to a Friday note from Tickmill Group analyst James Hart.
According to their note, JPMorgan analysts believe further outflows from GBTC could potentially range from $5 billion to $100 billion due to rising Grayscale management fees as investors seek cheaper alternatives. He said he expected the deal could lead to billions of dollars.
GBTC charges a management fee of as much as 1.5%, while most other Bitcoin ETFs charge between 0.2% and 0.4%.
But as reported by CNBC on Friday, Grayscale Investments CEO Michael Sonnenschein said GBTC is the largest Bitcoin fund with a multi-year track record and a diverse investor base. He pointed out that there is, and defended GBTC's high fees.
“Investors are looking at things like liquidity, track record and who the actual issuer of the product is,” Sonnenschein told CNBC at the World Economic Forum in Davos. “Grayscale is the cryptocurrency expert, and Grayscale has really paved the way for many of these products to come out.”
Sonnenschein told CNBC that other Bitcoin ETFs lack a track record and that issuers are using lower fees as an incentive to attract investors.
The Grayscale Spot Bitcoin ETF rose 2% on Friday, according to FactSet data. Bitcoin rose 0.5% over the past 24 hours to around $41,500 on Friday night, according to CoinDesk data.
“GBTC has seen a significant drop in capital, money is coming out of it, and the inflows into BlackRock and Fidelity are driving that down,” Akbar Thobani, CEO of sFOX, said in a phone interview with MarketWatch. It's like making up for it.” “So you see capital moving from one side to the other.”
-Christine Idzelis -Francis Huet
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