BlackRock has launched a Bitcoin ETF in Brazil, named iShares BitcoinTrust ETF BDR (IBIT39), in partnership with B3. This ETF plans to mirror the performance of its U.S. counterpart, with a 0.25% administrative fee waived for the first $5 billion AUM for one year. This move is part of the much broader trend of increasing interest and investment in cryptocurrency ETFs, which was clearly seen in the success of BlackRock's spot Bitcoin ETF in the U.S. Despite a recent dip in Bitcoin's price and contrasting inflow dynamics among various ETFs, the future of cryptocurrency ETFs still looks very promising.
BlackRock Introduces Bitcoin ETF in Brazil
BlackRock has expanded its cryptocurrency offerings to Brazil with the launch of a new Bitcoin ETF (Exchange-Traded Fund). The ETF, named iShares Bitcoin Trust ETF BDR (Brazilian Depositary Receipts), or IBIT39, will start trading on Mar. 1, according to an announcement made by the company on Feb. 29. This move is made possible through a partnership with B3, Brazil's financial market infrastructure provider.
Karina Saade, BlackRock Brazil's president, highlighted the significance of this launch at the company's headquarters in São Paulo. She pointed out that the iShares Bitcoin Trust ETF BDR represents a big step forward in ETF innovation, offering investors access to Bitcoin through a familiar security that can be easily incorporated into their investment portfolios.
This Brazilian ETF is essentially a mirror of the Bitcoin ETF that BlackRock launched in the United States in January. It plans to replicate the performance of the U.S. ETF and will charge an administrative fee of 0.25%, which will be waived for the first $5 billion of assets under management (AUM) for one year. However, it's important to note that BDRs are fully taxable.
Access to the Brazilian fund will be initially restricted to investors who have at least 1 million reals ($201,000) already invested in the market, with retail sales pending regulatory approval.
The introduction of this ETF adds to the growing list of crypto-related investment options in Brazil. B3 currently lists 13 ETFs with crypto exposure, having a combined value of 2.5 billion reals ($503 million).
The BlackRock spot Bitcoin ETF has seen great success in the United States, reaching $2 billion in AUM within just two weeks of its approval by the Securities and Exchange Commission (SEC) on Jan. 10. Looking ahead, BlackRock is also considering the launch of a spot Ether ETF in Brazil upon receiving SEC approval for a similar product in the United States.
The Next Big Wave
Bitwise's Chief Investment Officer, Matt Hougan, recently shared his thoughts about the rising interest in spot Bitcoin ETFs, predicting a huge influx of institutional capital into the space. In an interview with CNBC on Feb. 29, Hougan pointed out that the initial wave of interest in Bitcoin ETFs primarily came from retail investors, hedge funds, and independent financial advisors.
However, he anticipates an even larger wave of institutional investment on the horizon, especially once major wirehouses, like Bank of America’s Merrill Lynch and Wells Fargo, begin to offer Bitcoin ETF trades to their wealth clients. Notably, these financial giants have reportedly started providing access to spot Bitcoin ETFs, albeit only to clients who explicitly request these products. Morgan Stanley is also reportedly considering the inclusion of spot Bitcoin ETFs on its brokerage platform.
Hougan compared the introduction of Bitcoin ETFs to Bitcoin's "IPO moment," signaling a new era of price discovery for the cryptocurrency. He called the supply-demand dynamics "off the hook," with the purchase volume of Bitcoin ETFs far outstripping the daily mined supply of Bitcoin, especially in light of the upcoming halving event. This imbalance, according to Hougan, could drive Bitcoin prices way higher, potentially surpassing Bitwise's initial 2024 prediction of $80,000 to reach between $100,000 and $200,000, or even higher.
Since their launch seven weeks ago, spot Bitcoin ETFs have seen massive inflows, with Bitwise's Bitcoin ETF (BITB) recording the fourth-largest inflows of $1.11 billion. On Feb. 28, inflows reached a new all-time high of $673.4 million for the ecosystem.
ETF Dynamics and Halving Effects
On the other hand, Bitcoin (BTC) experienced a decline, falling by about 3% from its 24-hour high, which could be attributed to very large investor withdrawals from Grayscale’s spot Bitcoin ETF. On Feb. 29, the cryptocurrency reached a high of $63,585 but later dropped to just under $61,500. This downturn coincided with the Grayscale Bitcoin Trust (GBTC) witnessing its second-largest net outflow on record, with $598.9 million pulled from the fund on the same day, according to data from Farside Investor.
The outflows from GBTC starkly contrasted with the broader trend observed on Feb. 28, when ten United States spot Bitcoin ETFs collectively saw a record-high net inflow of $673.4 million. Fidelity’s Bitcoin ETF recorded $44.8 million in net inflows on Feb. 29, its fourth-lowest day of inflows.
While this was happening, JPMorgan analysts shared a cautionary note, predicting a potential decline in BTC’s price after the April halving event. Contrary to the common belief that the halving might boost Bitcoin's value, the analysts suggest it could instead drop to $42,000. They argue that the production cost of mining Bitcoin, which is expected to "mechanically double" to $53,000 post-halving, could be offset by a 20% decrease in mining difficulty. This adjustment is anticipated due to less efficient miners possibly stopping operations as costs rise, which would then lower Bitcoin’s mining difficulty by an estimated 20%.
