- Digital asset investment products saw minor outflows and massive volumes this week.
- Recently-greenlit spot Bitcoin ETFs have kicked off fierce competition by new funds.
- Incumbents with higher fees such as Grayscale face challenges to stay afloat.
Spot Bitcoin exchange-traded fund traders are going where the fees are lowest.
Bitcoin ETFs and other digital asset investment products took a minor hit this week with $21 million in net outflows, according to CoinShares’ weekly digital asset fund flows report — but the outflows don’t tell the whole story.
In the report, CoinShares’ James Butterfill wrote that trading activity has already reached seven times the usual weekly trading volume in 2023, at $11.8 billion in Bitcoin products traded on the week.
The majority of outflows are attributed to incumbent ETF providers, such as Grayscale Investments, Purpose Investments, and CoinShares, which lost $2.9 billion.
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Much of that capital moved into newer Bitcoin products, preventing large net losses.
Worst hit of the incumbents was Grayscale Investments’ GBTC offering, which investors fled to the tune of $2.2 billion.
The exodus was due in part to the far lower fees of traditional finance newcomers, such as Blackrock and Fidelity, with race-to-the-bottom fees reaching 0.25% compared to Grayscale’s 2%.
According to Bloomberg ETF expert James Seyffart, the worst is yet to come for Grayscale.
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On Sunday he made an X post about GBTC outflows, saying, “Bad day for Bitcoin ETFs overall in the Cointucky Derby.”
He added that “outflows aren’t slowing — they’re picking up.”
Woof. BAD day for #Bitcoin ETFs overall in the Cointucky Derby. $GBTC saw over $640 million flow out today. Outflows aren’t slowing — they’re picking up. This is the largest outflow yet for GBTC. Total out so far is $3.45 Billion. (Don’t have BlackRock data yet) pic.twitter.com/jNOyiTADVq
— James Seyffart (@JSeyff) January 23, 2024
Creditors such as the bankrupt FTX crypto exchange also added to Grayscale’s woes with aggressive selling of nearly $1 billion GBTC following the SEC’s January 10 approval of spot Bitcoin ETFs in the country, according to data shared by Seyffart and his colleagues.
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Flight to lower fees
Leading the pack of newcomer ETFs this week for inflows were Blackrock, at $930 million, and Fidelity, at $860 million.
Blackrock’s one-two punch is a discount of 0.12% for the first $5 billion sold of its iShares ETF.
Other funds have come up with their own strategies to lure investors, such as Cathie Wood’s Ark Invest, which offers zero fees for the first six months of operation.
The ‘Nine’ saw another jump in volume today, up 12% vs Thur and 53% from Wed, a rare phenomenon. Also check out $FBTC seeing more trading than $IBIT, those two are in a legit duel to be The One.. but all of them posting huge numbers for newbies, competition is making them all… pic.twitter.com/H2zhz2mEMz
— Eric Balchunas (@EricBalchunas) January 19, 2024
Of the 11 spot Bitcoin ETFs approved earlier this month, Blackrock’s iShares ETF, and Fidelity’s Advantage ETF have each amassed over $1 billion in net assets.
The two have emerged as clear leaders in what has been called a “two-horse race” for top spot in the Bitcoin ETF market.
Tyler Pearson is a Junior Markets Correspondent at DL News. If you’ve got a hot crypto tip, please reach out at ty@dlnews.com.