While BlackRock and Fidelity have dominated inflows, other issuers with a strong brand among cryptocurrency aficionados aren’t that far behind.
Both Bitwise and a joint venture of Ark Investments and 21Shares are initially waiving fees. Bitwise said its inflows in the first three days totaled US$305.5 million, while the Ark/21Shares ETF has had inflows of nearly US$230 million, according to BitMEX.
By contrast, the Grayscale Bitcoin Trust (GBTC), with a fee of 1.5 per cent, has seen outflows this month. The trust was converted into an ETF at the same time the other ETFs were launched, and has seen US$1.16 billion in outflows in its first three trading days, data from BitMEX showed.
Paul Karger, founder of TwinFocus, a boutique wealth management advisory firm, says some of his clients are selling their GBTC holdings and moving into the cheaper new ETFs.
“We’re seeing a shift from GBTC to the new, lower-cost ETFs, as well as some clients putting more money to work in the cheaper options” from brand-name issuers, he said.
Grayscale CEO Michael Sonnenshein pointed out that unlike the newly launched products, Grayscale already had substantial assets at the time of its conversion, allowing investors to lock in profits after Bitcoin’s run. The firm’s fees, meanwhile, “reflect a certain value that it brings to the market and to investors,” he told Reuters on the sidelines of the World Economic Forum in Davos.
Grayscale “has a 10-year track record. It has 20-some-odd billion dollars of AUM (assets under management), a diversified shareholder base, tight spreads, and unbelievable liquidity,” Sonnenshein said.
The next hurdle for the funds will likely be demonstrating their ability to win acceptance among institutional investors, such as pension funds, and investment advisers.
“The question of what to do with these in a portfolio has been drowned out by a lot of the noise” surrounding the new products’ debut, Steve Kurz, head of asset management at Galaxy Digital, said ahead of last week’s launch of its ETF. Galaxy has partnered with Invesco to launch the Invesco Galaxy Bitcoin ETF, one of the nine new spot bitcoin ETFs.
The process of talking about what kind of allocation is appropriate and how spot bitcoin ETFs will “work their way into model portfolios will come into focus in the next six months,” he said.