The Bitcoin halving event on Apr. 20 led to record transaction fees, but these fees ended up tumbling the following day. The focus on Bitcoin extended into the realm of ETFs, with BlackRock's iShares Bitcoin Trust (IBIT) gaining traction and closing the gap on Grayscale's Bitcoin Trust, which is still experiencing big outflows. However Grayscale is preparing to launch a more cost-effective Mini Trust. Meanwhile, in Hong Kong, firms are setting competitive fees for the newly approved Bitcoin and Ethereum ETFs.
Bitcoin Halving Day Sees Record Fees
Bitcoin transaction fees saw a major decline just a day after hitting a record high on Apr. 20, the day of the fourth Bitcoin halving event. On that day, fees averaged at $128, but by April 21, they dropped to between $8 and $10 for medium-priority transactions, according to mempool.space. This sharp decrease came after Bitcoin achieved a total of $78.3 million in fees on Apr. 20, outperforming Ethereum by more than twenty-four times, according to Crypto Fees.
Bitcoin total transaction fees on Apr. 20 (Source: Crypto Fees)
The peak in fees was influenced a lot by intense activity around block 840,000, the block in which the halving occurred. This block became a focal point due to its historical significance, attracting huge amounts of attention from investors and enthusiasts. Most of the demand at block 840,000 came from memecoin and nonfungible token enthusiasts competing to inscribe and etch rare satoshis via the Runes protocol. This led to the block including 3050 transactions, with an average fee close to $800.
This heightened fee period lasted only until about block 840,200. Despite the initial surge in transaction fees that somewhat cushioned the impact of the halving of block rewards from 6.25 Bitcoin to 3.125 Bitcoin, the average block fee eventually fell below the new reward level, so the boost in miner earnings was only temporary.
Additionally, Bitcoin fees also consistently surpassed those of Ethereum for six consecutive days leading up to the halving. Despite the big financial activity and changes in fee structure, Bitcoin's market price was still relatively stable. According to CoinMarketCap, the price of BTC was able to climb by 1.16% over the past day of trading. As a result, the crypto king was worth $65,775.58 at press time. This stability suggests that while the halving event led to short-term fluctuations in transaction fees and miner earnings, it had a minimal immediate impact on Bitcoin's overall market price.
Bitcoin ETFs on the Rise
Now that the Bitcoin halving is completed, Hunter Horsley, the CEO of Bitwise predicted that wealth management firms are very likely to increase their holdings in Bitcoin exchange-traded funds (ETFs). The prediction could make some sense considering the growing demand for these ETFs, particularly as Bitcoin investments in the U.S. have seen a net positive inflow right before the halving, after a five-day period of declines.
The competitive landscape among Bitcoin funds is shifting a bit. BlackRock's iShares Bitcoin Trust (IBIT) is rapidly closing the gap with the long-time market leader, Grayscale's Bitcoin Trust (GBTC), now only $2 billion behind. This progress puts BlackRock in a strong position to potentially overtake Grayscale as the world's largest Bitcoin fund. While Grayscale has seen a large 68-day decline in its fund value, losing nearly $16 billion, IBIT has seen steady and continuous growth, with its total assets reaching approximately $17.3 billion.
Despite Grayscale's early dominance, it has been facing challenges. In just the past few days, the firm's spot Bitcoin ETF investors withdrew $89.9 million. Since January, the net outflow has reached $1.6 billion. Meanwhile, competitors like Fidelity and BlackRock have quickly captured major market shares since they began trading.
The adoption of Bitcoin ETFs by registered investment advisers (RIAs) and multifamily offices has been described by Horsley as "stealthy but significant." This indicates that major financial players are quietly but thoroughly evaluating the Bitcoin market. Recent data from Farside reveals that there is still some volatility in fund flows, with GBTC experiencing fluctuating outflows, including a sharp decrease from $154.9 million on one day to $17.5 million the next.
Grayscale Launches Cost-Effective Mini Bitcoin Trust
Grayscale has tried to make a plan to combat its eye watering outflows, but it seems like not everyone is very excited about it. The company is set to launch a more cost-effective version of its Bitcoin trust, the Grayscale Bitcoin Mini Trust (BTC), which will feature much lower fees than its predecessor, the Grayscale Bitcoin Trust (GBTC). The new fund’s fees will be just 0.15%, which is a drastic reduction from the current 1.5% charged by GBTC. This new adjustment positions the Mini Trust as the most affordable option among the 11 spot Bitcoin ETFs approved since January, with its closest competitor being Franklin Templeton’s ETF, which charges 0.19%.
Despite the attractive low fee, Bloomberg analyst Eric Balchunas warned investors in a recent X post, describing the announcement as "pro-forma financials" which are hypothetical at this stage. He suggested that the fee could still change before the trust’s launch, though he acknowledged Grayscale’s strategy to attract attention with their more competitive pricing.
GBTC has seen approximately $16.73 billion withdrawn since the launch of spot Bitcoin ETFs in January. According to Thomas Fahrer, CEO of Apollo, these outflows have pressured Grayscale to offer more competitive fees to keep and attract investors.
In addition to providing cheaper investment options, Grayscale also plans to distribute shares of the new Bitcoin trust to existing GBTC shareholders and will also contribute an undisclosed amount of Bitcoin to the new trust.
BlackRock's IBIT Stands Out
Meanwhile, things are still looking good for BlackRock. In a recent post on X Bloomberg Intelligence's ETF analyst Eric Balchunas pointed out a very interesting coincidence: not only did the Bitcoin halving event happen on Apr. 20 or “4/20,” which is a key meme date in itself, but the largest United States spot Bitcoin ETF sealed 69 days of straight inflows.
Despite experiencing a general slowdown in inflows since their peak in March, Bitcoin ETFs, particularly the iShares Bitcoin Trust (IBIT) managed by BlackRock, have continued to attract funds. In fact, IBIT has not recorded a single day of outflows and is still the largest ETF by assets under management. According to Farside, there seems to be a slight resurgence in momentum, with IBIT receiving almost $30 million on Apr. 19.
The performance of Bitcoin ETFs has sparked some differences in opinions. Recent SEC form 13F filings have raised some concerns about their penetration into the mainstream market, with Jim Bianco from Biacno Research labeling the first-quarter allocation data as disappointing and noting that unrealized gains are quickly diminishing.
In contrast, Balchunas offered a much more optimistic view, comparing the handling of these ETFs by asset managers to adding "hot sauce" to a dish. He believes that although IBIT now has around 60 holders, they represent only a tiny 0.4% of total shares, indicating that while many are investing, the investments are generally small. This aligns with a high number of daily trades, supporting Balchunas's thesis that these ETFs are used to add a bit of spice to conventional investment portfolios.
Hong Kong Firm Sets Fees for Bitcoin and Ethereum ETFs
Hong Kong-based investment firm Victory Securities recently revealed its fee structure for its proposed Bitcoin and Ethereum ETFs after the region's approval of cryptocurrency ETF products. Although the Hong Kong Securities and Futures Commission (SFC) has not yet released a list of approved ETF issuers, Victory Securities is still moving ahead with its plans, setting primary market fees for Ethereum and Bitcoin ETF shares between 0.5% and 1%, with a minimum fee of $850.
For secondary market transactions, the firm proposed a fee of 0.15% for online trades and 0.25% for transactions conducted over the phone. These fees are in line with those charged by U.S. asset managers, where fees range from 0.19% to 0.90%.
Other Chinese asset managers, including the Hong Kong units of Harvest Fund Management, Bosera Asset Management, and China Asset Management (ChinaAMC), also plan to launch their own spot Bitcoin and Ether ETFs.
