Key points
- Spot Bitcoin ETFs are facing redemptions as the underlying cryptocurrency sells off.
- Analysts remain optimistic about Bitcoin’s future growth despite the current pullbacks.
- BlackRock’s iShares Bitcoin Trust has amassed about $15 billion in assets since its launch in late January, the fastest a new ETF has reached that level.
- 5 stocks we like best about iShares Bitcoin Trust
Spot Bitcoin Exchange Traded Funds, including the iShares Bitcoin Trust NASDAQ: GOGrayscale Bitcoin Confidence NYSEARCA: GBTCFidelity Wise Origin Bitcoin Fund NYSEARCA: FBTCARK 21Shares Bitcoin ETF BATS: ARKB and Bitwise Bitcoin ETF NYSEARCA: BITBhave seen redemptions in recent days, highlighting the volatile nature of these new securities.
However, analysts expect plenty of room for Bitcoin, meaning the current sell-off could simply be a round of profit-taking after a huge run-up in February and the first half of March.
BlackRock’s IBIT launched in late January 2024 and already has approximately $15 billion in assets, making it the fastest growing ETF on record (in terms of assets).
Easy access to Bitcoin
Spot Bitcoin ETFs offer a simple and convenient way for more investors to access cryptocurrency without having to purchase Bitcoin directly.
Like other Bitcoin ETFs, the iShares Bitcoin Trust chart shows that it is doing a good job track the underlying crypto asset.
Bitcoin ETFs launched with low fees
These ETFs have also waived fees to attract assets, which has contributed to the rapid growth.
In a recent media interview, Michael Sonnenshein, CEO of Cryptoscale asset manager Grayscale, said that the company plans to further reduce fees for the Grayscale Bitcoin Trust ETF in the coming months.
The ETF’s current spending rate is 1.5%. This is significantly higher than the expense ratio of the largest Bitcoin ETF, the iShares Bitcoin Trust, whose expense ratio is 0.12%.
GBTC has seen higher outflows than other Bitcoin ETFs, likely due to its fee structure as investors can access the same asset class at a lower price.
Overall, the 11 Bitcoin ETFs recorded outflows of as much as $500 million on March 20, while Bitcoin itself fell to $60,760, before recovering and closing above $64,000.
Grayscale, the largest Bitcoin ETF with $25 billion in assets, has seen outflows of more than $1 billion in the past week. Grayscale has grown rapidly since it was converted to an ETF by a trust in January.
By comparison, rapid asset gatherer IBIT has $15.20 billion in assets, all raised since the ETF’s Jan. 11 launch.
Who buys Spot Bitcoin ETFs?
According to transaction records, the average trade size for BlackRock’s IBIT ETF is approximately $13,000. That might seem like a large number, but it’s actually peanuts for any institutional investor, so the average deal size indicates that retail investors have piled into the ETF. This is a double-edged sword.
On the one hand, IBIT and other Bitcoin ETFs have achieved their goal of attracting more retail investors to Bitcoin investments.
On the other hand, this exposes these ETFs to greater volatility risk as retail investors are quicker to sell when an asset collapses. Institutional investors, on the other hand, tend to buy with longer time horizons in mind.
Other ETFs for Bitcoin-related stocks
The “picks and shovels” metaphor is familiar to most investors: It applies to a style of investing that involves buying stocks that provide goods and services, such as technologies, to other companies that create the final product.
For example, cryptocurrency stocks like Coinbase Global Inc. NASDAQ: MONEY and Marathon Digital Holdings Inc. NASDAQ: MARA they are components of crypto ETFs such as the Amplify Transformational Data Sharing ETF NYSEARCA: BLOCK.
The BLOK ETF holds global stocks rather than tracking the price of Bitcoin directly on exchanges.
ETFs holding cryptocurrency stocks sold off soon after the launch of spot Bitcoin ETFs, but rallied in February and March.
The future of Bitcoin ETFs
While the underlying asset trades below its highs and drives spot Bitcoin ETFs lower, analysts still see huge potential for Bitcoin. In mid-March, analysts at London-based financial services firm Standard Chartered said Bitcoin could reach $150,000 this year and rise to $250,000 next year.
And if Bitcoin continues to rise, the value of Bitcoin spot ETFs will rise.
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