NEW YORK - A new batch of US Bitcoin exchange-traded funds (ETFs) has attracted strong investor interest, though it is unclear if they will be able to maintain the pace of inflows in coming weeks.
Investors have poured US$1.9 billion (S$2.55 billion) into nine new ETFs tracking the spot price of Bitcoin in their first three days of trading, data from issuers and analysts showed, with fund giants BlackRock and Fidelity pulling in the lion’s share of the flows.
Collective flows to the nine funds outpaced post-launch flows into the ProShares Bitcoin Strategy ETF, which drew a record US$1.2 billion in the first three days of trading after its 2021 launch. The SPDR Gold Shares ETF attracted US$1.13 billion in the first three days after its 2004 launch.
Still, the investments in the long-awaited ETFs – launched on Jan 11, a day after receiving approval from the United States Securities and Exchange Commission (SEC) – fell short of the most aggressive estimates of first-day flows in the billions of dollars.
Market participants said it remains to be seen to what degree funds tracking the notoriously volatile cryptocurrency continue drawing retail and institutional investors, and which issuers will come out ahead. Some bullish analysts have said flows could reach between US$50 billion and US$100 billion by the end of 2024.
Bitcoin is down more than 8 per cent since Jan 11, after rallying in recent months on anticipation that the ETFs would finally get the nod from the SEC.
“So far, the launches have almost measured up to the hype,” said Mr Todd Sohn, an ETF analyst at Strategas. “The next question is: What is their staying power? What will those flows look like in six months’ time, or six years from now?”
For now, lower fees and name recognition appear to be key factors in drawing investors. The iShares Bitcoin Trust ETF from asset management giant BlackRock has attracted more than US$700 million, while Fidelity’s Wise Origin Bitcoin Fund has topped US$500 million, according to BitMEX Research, a cryptocurrency research and analysis firm.
Fees among the nine issuers – before waivers -– range from a low of 0.19 per cent to a high of 0.39 per cent.
“Fees are clearly a key determinant for success,” said Mr Sui Chung, chief executive officer of CF Benchmarks, which is providing the index against which six of the new ETFs will be measured.
“Those that charge the lower management fees will unsurprisingly make themselves more appealing compared to their peers. Brand recognition is another core aspect.”
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, Mr 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.