(Bloomberg) — Bitcoin’s breakneck rally has generated record inflows into spot Bitcoin ETFs, solidifying the new asset class’s popularity with investors.
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BlackRock's iShares Bitcoin Trust (IBIT) and Fidelity Investments' WiseOrigin Bitcoin Fund (FBTC) to become the “Newborn Nine” received 79% of the total inflow amount. Directly in Bitcoin — since the U.S. Securities and Exchange Commission approved the asset on January 10th.
Four of the remaining seven funds responded by lowering fees than the two leader funds, according to a Bloomberg analysis of data from fund websites. Valkyrie Investments nearly halved its fees to 0.25% from the 0.49% it charged just before SEC approval. Franklin Templeton is now offering a sector-low 0.19% after lowering its initial management fee by 10 basis points. Only Bitwise hasn't made any changes.
Bitcoin has plummeted this year, topping $63,000 as retail investors wary of missing out on new ETFs. This conflict among fund managers is likely to continue as companies seek to rein in market share of the fast-growing asset class.
“We expect to see even more concentration in the top ETFs,” said Brian Armor, director of passive strategies research at Morningstar. “But other ETFs aren't going down without a fight. The fee war is likely to continue, which will continue to put pressure on leaders to maintain their edge.”
Since converting its Bitcoin trust into an ETF, Grayscale Investments has taken a different approach, choosing to maintain higher management fees than its new rival. Its fund (GBTC) has recorded more than $8 billion in outflows since its inception, according to Bloomberg data.
In a statement, a Grayscale spokesperson said: “The Grayscale team expected that GBTC's diverse shareholder base would engage in profit-taking and develop investment strategies that would impact the trust's capital flows. I'm glad it stabilized over time.” “We expect GBTC to continue to be Bitcoin's primary capital markets risk transfer tool.”
The sell-off has largely eased, with daily outflows averaging $138 million a day in February, slowing from $403 million in January. And Grayscale remains the largest fund, with $26 billion in assets under management, compared to BlackRock's $10 billion.
Meanwhile, there are signs that BlackRock is poised to take control of the sector away from Fidelity.
The New York-based firm's IBIT fund attracted $612 million in new investment on February 28, the most in a single day since its inception and the bulk of its new capital for most of the last month. This fund has taken in
Todd Thorne, ETF and technical strategist at Strategas Securities, said the world's largest fund manager distribution network could offer investors better liquidity than most competitors.
“The flows and volumes into BlackRock's products reflect BlackRock's commitment to this asset class,” Thorne said. “They recognize that it is a ‘new’ part of their investment portfolio, and I would like to believe that it is there to provide the access that investors want.”
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