The competition to build assets in new Bitcoin exchange-traded funds has been fierce, with BlackRock and Fidelity Investments taking the lead. However, the race is far from over.
Despite the recent conversion of the Grayscale Bitcoin Trust into an ETF, which had the most assets at $20.6 billion, it has seen a significant decrease of $5.8 billion. In comparison, the other seven funds have much lower asset values, ranging from the ARK 21Shares Bitcoin ETF with $684 million to the WisdomTree Bitcoin Fund with just $12 million.
While asset values may seem like the most important factor, Bloomberg Intelligence ETF analyst Eric Balchunas argues that the real winner in this race will be the fund that generates the most volume and liquidity. A fund with high volume is more likely to attract institutional investors who value the ability to enter and exit trades seamlessly without affecting prices or alerting other investors.
Being the liquidity leader also provides some protection for the fund company, even in the face of competitors offering lower fees. This is evident from the success of the SPDR S&P 500 Trust, which has $491 billion in assets, surpassing competitors like the Vanguard S&P 500 Index ETF and iShares Core S&P 500 ETF, despite having a higher expense ratio.
In a significant development, the iShares ETF recorded slightly higher volume than Grayscale’s fund on Thursday – a milestone since the new ETFs started trading, according to Bloomberg Intelligence.
The Race for Bitcoin ETFs Continues
Fund issuers like Bitwise Asset Management, VanEck, and Grayscale are still actively seeking investors for their Bitcoin funds. Recently, a Bitwise representative approached Douglas Boneparth, President of Bone Fide Wealth, to pitch the company’s Bitwise Bitcoin Fund. With $648 million in assets, this fund ranks as the fifth largest in the market. Interestingly, one of its selling points is that it allocates a portion of its profits to support Bitcoin open-source development. Boneparth’s firm manages around $90 million.
While the competition among fund issuers remains fierce, most advisors may take some time before they start investing in these new funds. According to Boneparth, “Broker-dealers and wirehouses are still figuring out how to approach Bitcoin ETFs. Their decision will directly impact whether their advisor networks can or cannot take any action regarding these funds.”
Meanwhile, institutional investors are eagerly awaiting the approval of options on the ETFs in the coming months. These options would provide them with better hedging strategies and enable them to pursue more elaborate investment approaches.
Eric Balchunas, an ETF analyst, believes that even if their own ETFs face delays, many fund companies will want to have some involvement in digital assets. He notes that every company has salespeople who are in contact with advisors. If an advisor expresses interest in Bitcoin or cryptocurrencies, these companies want to offer a product rather than recommend a competitor’s offering.
It is highly likely that all ten of the new Bitcoin funds will continue to compete for market share in the long run. As Balchunas suggests, these fund companies understand the importance of having exposure to digital assets, regardless of the progress of their own ETFs.
The debut of Bitcoin ETFs is just the first step in a race that is expected to span several years.