BlackRock's iShares Bitcoin Trust (IBIT) surpassed 100,000 BTC under management. Within just 22 days of its launch, IBIT's holdings skyrocketed by over 3,700%, positioning it well ahead of competitors like Fidelity's Wise Origin Bitcoin Fund and the Grayscale Bitcoin Trust ETF. The competitive landscape in the Bitcoin ETF industry could bring up potential challenges for new entrants due to the ongoing fee war. Meanwhile, the future for Ether ETFs are still uncertain, with the SEC delaying decisions on multiple applications and analysts providing mixed views on the likelihood of approval in 2024.
BlackRock’s iShares Bitcoin Trust Exceeds 100,000 BTC
BlackRock's iShares Bitcoin Trust (IBIT), a spot Bitcoin (BTC) exchange-traded fund (ETF), has achieved a huge milestone by surpassing 100,000 BTC under management. As of Feb. 13, IBIT reported holdings of 105,280 BTC, becoming the first spot Bitcoin ETF in the United States to reach this level of managed assets in just 22 days of trading.
BlackRock's aggressive buying spree since launching the iShares Bitcoin ETF on Jan. 11 has seen the trust's holdings increase by over 3,700%, from an initial 2,621 BTC. This rapid growth certainly cements BlackRock's strong position in the spot Bitcoin ETF market, which includes competitors like the Fidelity Wise Origin Bitcoin Fund (FBTC), holding 83,925 BTC as of Feb. 13.
In contrast, the Grayscale Bitcoin Trust ETF (GBTC) has reduced its BTC holdings by 25%, from 619,220 BTC at its trading debut to 463,475 BTC by Feb. 13, making it the only spot Bitcoin ETF actively selling off BTC after the launch of spot Bitcoin ETFs in the United States.
The achievement of the iShares Bitcoin ETF comes amid record daily net inflows for spot Bitcoin ETFs, totaling $631.3 million, with the iShares Bitcoin ETF alone attracting $493 million. This influx has led to speculation that BlackRock has faced challenges in meeting the high demand, with reports of the investment firm turning to Coinbase to purchase BTC directly due to a shortage of over-the-counter (OTC) sellers.
BlackRock’s achievement coincides with a large rally in the Bitcoin market, with BTC surpassing the $51,000 mark for the first time since November of 2021 and reclaiming a $1-trillion market capitalization on Feb. 14. Bitcoin's success is evident in its recent performance, with a more than 20% increase over the past 30 days and a surge in the Crypto Fear & Greed Index to levels not seen since its all-time high in November 2021.
Survival of the Fittest
Although there is currently a lot of excitement about the newly launched Bitcoin ETFs, it might be short lived. The intense competition among issuers to lead the United States' Bitcoin ETF market could actually result in many of the current ETFs being shut down due to profitability issues. Analysts suggest that the fierce competition over fees might prevent smaller issuers from entering the market. However, this competition does still benefit investors through reduced fees.
Hector McNeil, co-CEO and founder of HANetf, believes that most of the existing Bitcoin ETFs will not break even unless they manage to accumulate billions in assets under management (AUM), a milestone he thinks many might not achieve. Currently, the 10 approved Bitcoin ETFs have collectively garnered over $10 billion in AUM, with the majority controlled by industry giants BlackRock and Fidelity.
The fee war has already led to large fee reductions among issuers, with some, like Invesco and Galaxy, lowering their fees to 0.25% to match competitors, even offering zero fees for initial periods under certain conditions. This aggressive pricing strategy has made it very difficult for new entrants to find a profitable foothold in the market, as matching low fees could lead to major revenue issues, while higher fees could impede asset accumulation.
Morningstar Research and Bloomberg ETF analysts agreed with McNeil's sentiments, and also acknowledged the challenges for smaller issuers in a market dominated by low fees and established players. New entrants might need huge backing or more unique offerings to differentiate themselves in a very crowded and competitive field.
Despite these challenges for issuers, most experts agree that investors emerge as the biggest winners from the ongoing fee wars, benefiting from lower costs to access Bitcoin markets. Market makers also benefit from increased liquidity in both the Bitcoin and ETF markets.
Uncertain Future for Ether ETFs
Meanwhile, in a recent interview on CNBC's Squawk Box, Gary Gensler, the Chair of the United States Securities and Exchange Commission (SEC), maintained his elusiveness regarding the approval status of spot Ether ETFs. This is very similar to what Gensler’s attitude was in the handling of Bitcoin ETFs by not providing any specific updates or timelines.
This comes as the SEC delayed its decision on multiple Ether ETF applications, including those from financial giants like Invesco, Grayscale, Fidelity, and BlackRock, among others. The delays have been a continuing trend, with Invesco's Galaxy Ether ETF decision being postponed as recently as Feb. 6, after a previous postponement in December.
Franklin Templeton, a giant in asset management, has also thrown its hat into the ring with a recent filing for a spot Ether ETF, aiming to not only offer exposure to Ether but also to leverage staking for additional passive income, similar to a strategy mentioned in ARK 21Shares' filing.
The timeline for the SEC's decision on these ETF applications is tightly packed throughout 2024, with critical dates spanning from May to August for decisions on applications from VanEck, ARK 21Shares, Hashdex, Grayscale, Invesco, Fidelity, and BlackRock.
Bloomberg ETF analysts have offered mixed views on the likelihood of an approval for Ether ETFs. James Seyffart suggests a possibility of a collective decision by May 23. Conversely, Eric Balchunas has tempered expectations by lowering the probability of an Ether ETF approval in 2024 from 70% to 60%, anticipating that the SEC might further delay decisions.
The situation with Bitcoin ETFs contrasts sharply, as seen by the milestone achievement of BlackRock's iShares Bitcoin Trust, which is now the first spot Bitcoin ETF in the U.S. to exceed 100,000 BTC under management.
