Winners and Losers in the US Spot Bitcoin ETF Race

“They’re
both
massive
asset
managers
with
incredible
reach
and
the
strongest
distribution
networks
[…]
everyone
is
a
client
of
iShares,
and
other
firms
don’t
have
platforms
like
Fidelity,”
says
Bryan
Armour,
director
of
passive
strategies
research
for
North
America
at
Morningstar.

Meanwhile,
the
Grayscale
Bitcoin
Trust,
now
ETF –
the
favoured
crypto-tracking
ETF
for
investors
before
the
advent
of
spot
bitcoin
funds –
has
seen
$17.2
billion
go
out
the
door.

Grayscale,
which
heavily
lobbied
the
Securities
and
Exchange
Commission
(SEC)
for
permission
to
launch
spot
bitcoin
ETFs,
has
seen
the
assets
in
its
fund
plummet
to
$17.6
billion
from
$27.2
billion
in
February.

“It’s
been
a
very
successful
launch
for
spot
bitcoin
ETFs
overall,
albeit
with
some
wild
price
swings,”
says
Armour.

“The
nine
new
bitcoin
funds
gathered
significant
inflows,
while
Grayscale’s
newly
converted
ETF
saw
major
outflows.”

Net
Inflows
for
Spot
Bitcoin
ETFs

Source:
Morningstar
Direct.
Data
as
of
April
30
2024

The
Long
Road
to
Spot
Bitcoin
ETFs

The
SEC’s
approval
of
the
first
spot
bitcoin
ETFs
in
January
was
a
long-awaited
development
for
crypto
enthusiasts
and
fund
companies
looking
to
join
the
fray.

Before
then,
the
SEC
prohibited
ETFs
from
directly
owning
bitcoin.
Investors
who
didn’t
want
to
buy
and
hold
the
cryptocurrency
directly
could
either
invest
in
the
Grayscale
Bitcoin
Trust
or
gain
exposure
through
ETFs
that
tracked
the
price
of
bitcoin
via
futures,
such
as
the
$2
billion
ProShares
Bitcoin
Strategy
ETF
(BITO).
These
two
types
of
investments
had
downsides.
Grayscale
Bitcoin
Trust
had
a
2%
expense
ratio
fee,
and
both
methods
often
struggled
to
track
bitcoin’s
price
because
of
their
structures.

The
Grayscale
Bitcoin
Trust
was
the
only
way
US
investors
could
invest
in
bitcoin
directly
rather
than
through
futures,
besides
holding
the
cryptocurrency
itself.
This
was
because
the
SEC
didn’t
allow
spot
bitcoin
ETFs –
funds
that
hold
the
asset
directly,
as
opposed
to
tracking
it
via
futures
markets.
It
rejected
multiple
proposals
to
open
spot
bitcoin
ETFs
after
the
first
application
in
2013.

Grayscale
sued
the
agency
in
2022
over
its
refusal
to
let
Grayscale
convert
its
trust
into
an
ETF.
The
next
year,
Ark
Investments
and
BlackRock
(BLK) attracted
more
attention
by
asking
for
approval
to
launch
spot
bitcoin
ETFs.
Grayscale
won
its
case
in
August
of
2023,
and
on
January
10
2024,
the
SEC
approved
11
ETF
proposals.
The
next
day,
10
of
them,
including
Grayscale’s
newly
converted
ETF,
began
trading.

Total
Weekly
Net
Flows
for
All
Spot
Bitcoin
ETFs

Data:
January
11
2024
through
April
30,
2024.

Source:
Morningstar
Direct. Data
as
of
Apr
30
2024. 

Spot
Bitcoin
ETFs
Winners
and
Losers

Since
all
the
funds
hold
the
same
asset,
they
have
roughly
the
same
performance,
with
returns
for
all
hovering
around
28%
as
of
the
end
of
April
since
their
launch
in
January.

Despite
this
nearly
identical
performance,
investor
responses
to
the
new
ETFs
have
ranged
widely.
The
iShares
Bitcoin
Trust
ETF
(IBIT) has
taken
in
$15.6
billion
from
investors
since
its
launch
and
has
$16.5
billion
in
assets.
Fidelity
Wise
Origin
Bitcoin
ETF
(FBTC) has
seen
$8.2
billion
come
in,
with
assets
standing
at
$9.2
billion.

Funds
from
smaller
players
like
ARK
and
Bitwise
also
raked
it
in.
The
ARK
21Shares
Bitcoin
ETF
(ARKB) pulled
in
$2.2
billion
and
now
has
$2.6
billion
in
total
assets.
Investors
put
$1.8
billion
into
Bitwise
Bitcoin
ETF
(BITB),
which
sits
at
$2
billion
in
assets.

Expense
Ratios
for
Spot
Bitcoin
ETFs

Source:
Morningstar
Direct.
Data
as
of
April
30
2024.

The
most
obvious
loser
of
the
rollout
has
been
Grayscale.
Investors
have
pulled
$17.2
billion
from
its
ETF.
While
Grayscale
lowered
its
ETF’s
fees
from
2.0%
to
1.5%,
that
is
still
six
to
seven
times
higher
than
the
other
spot
ETFs,
whose
expense
ratios
range
from
0.19%
to
0.25%.

Most
of
the
funds
temporarily
cut
or
even
eliminated
fees
during
the
early
launch
period.
iShares’
fund
cut
its
expense
ratio
to
a
discounted
rate
of
0.12%,
while
others,
including
Fidelity’s
fund,
cut
theirs
to
zero
for
differing
introductory
periods.
Each
fund
has
a
different
introductory
offer,
and
the
discount
for
each
expires
at
a
different
date.

“Grayscale
didn’t
want
to
kill
the
goose
that
laid
the
golden
egg.
They’d
earned
more
than
$1
billion
in
fees
from
GBTC
over
the
years,”
Armour
explains.

He
adds:
“maybe
they
thought
they
could
be
a
[SPY-]
[SPDR
S&P
500
ETF
Trust]
or
[QQQ] [Invesco
QQQ
Trust]-like
liquidity
vehicle,
being
the
fund
‘where
the
traders
go.’
They
likely
also
thought
the
costs
of
switching
due
to
capital
gains
would
be
high
enough
to
keep
people
in
the
fund.”

The
author
or
authors
do
not
own
shares
in
any
securities
mentioned
in
this
article

SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk