Collectively the spot Bitcoin ETFs have been quite successful, but even individually, most of the BTC ETFs would be considered successful compared to most ETFs, according to an extensive update from NYDIG.
NYDIG researchers note that price movements and ETF flows will likely work in concert with each other, meaning that positive price momentum will likely lead to more inflows (and vice versa) in a self-reinforcing cycle, “until one variable changes.”
Notably, Bitcoin ETFs gathered net $12B in funds since their launch earlier this year.
NYDIG points out that the net inflows since the launch spot bitcoin ETFs on January 11th have been steady.
However, the initial flows underwhelmed, “peaking at a cumulative $1.3B before turning to nearly two weeks of net outflows that took the cumulative net inflow number down to $745M on the 10th day of trading.”
At the time of writing, the cumulative net inflow number “stands at $12.0B, punctuated by over a billion dollars of inflows on Tuesday (3/12) alone.”
According to NYDIG’s analysis, the event of 2024 within crypto and perhaps the entire world of financial markets, has been the launch of spot bitcoin ETFs in the United States.
According to available research, the average ETF size is $1.75B while the median size is $147.2M.
NYDIG also mentioned that there are some huge ETFs out there that skew the average well above the median. And the median ETF, with an average fee of about 50 bps, must “not be a big money maker.”
As stated in the report, that amounts “to about $740K in revenue for the median ETF using those numbers.”
ETFs are likely “a winner take most market, as are many things in life, and a game of scale.”
Considering those figures, only one of the spot ETFs would be considered below the median, the WisdomTree Bitcoin Fund (BTCW) at $75M in net assets.
The next smallest is the Franklin Bitcoin ETF (EZBC) at $228M in net assets, which is still “well above the median ETF size.”
NYDIG says that they know that positional comparisons have real behavioral consequences though (one tends to care what ones’ neighbor makes, rather than what some other person in another city makes), so the fact that “most of the spot ETFs are above the median is probably of little solace given that iShares Bitcoin Trust (IBIT) commands nearly $16B in net assets.”
The report also noted that GBTC has struggled amidst fierce competition from the offerings of BlackRock ($16.3B in AUM), Fidelity ($9.7B in AUM), ARK 21Shares ($2.9B in AUM), and Bitwise ($2.1B in AUM).
All competitive funds have “some sort of fee waiver, either on AUM amounts, durations, or both.”
However, even without the fee waivers, GBTC’s 1.5% expense ratio is “still multiples of the 0.25% charged (without fee waivers) by the leading challengers, BlackRock and Fidelity.”
With that as the backdrop, GBTC has reportedly “hemorrhaged $11.7B in funds since converting to an ETF, with no real clarity on when it all might stop.”
According to NYDIG’s analysis, it is remarkable that GBTC’s AUM is flat (due to bitcoin price appreciation) since the ETF conversion despite “losing about 41% of its initial funds.”
This past week saw Grayscale’s first competitive response, the filing of a registration statement for the Grayscale Bitcoin Mini Trust, ticker BTC.
While important details are still missing, like the exact fee, the expectation is that this “will be a low-cost version of GBTC with the highly coveted BTC ticker, which came through Grayscale’s 2021 investment in ClearShares, which owned the ticker.”
The report further noted that shareholders of GBTC are expected to be given shares of BTC “via a tax-free spin-off, thus seeding BTC with some amount of bitcoins and AUM.”
As explained in the update, the ETF will have to be “approved by the SEC in the same manner as GBTC and the other ETFs, going through the form 19b-4 exchange rule change request gauntlet, lasting up to 240 days in total when the clock starts, and it has yet to start.”
Given that GBTC has “lost $325M per day in March, that 240-day period, of which approval is not assured, could prove to be a very long one.”
Gold ETFs have already set “a precedent for introducing cost-effective alternatives within the same asset class from the same sponsor, catering to fee-conscious investors and gathering new funds.”
On Monday, VanEck announced that it “would waive its fee on the VanEck Bitcoin Trust (HODL) entirely on the first $1.5B in assets until March 31st, 2025.”
Before dropping its fee “to 0% from 0.2%, HODL had $320M in net assets, putting it in 8th place out of the 10 competing spot ETFs.”
But the fee announcement “jolted inflows, resulting in $232M of infalows this week (through Thursday), vaulting it past Valkyrie Bitcoin Fund (BRRR) and into 7th place in term of net assets. This case illustrates, that at least of this short time frame, fees matter to investors.”