(Bloomberg) — Bitcoin's rapid rally drove record inflows into spot Bitcoin ETFs — solidifying investor favorites in this new asset class.
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BlackRock Inc.'s iShares Bitcoin Trust (IBIT) and Fidelity Investments' Wise Origin Bitcoin Fund (FBTC) have taken 79% of total inflows into the “Newborn Nine” – a popular name for the group of new exchange-traded funds that invest directly in Bitcoin – since the US Securities and Exchange Commission approved the asset on January 10th.
Four of the remaining seven funds have responded by cutting their fees below those of the top two funds, according to a Bloomberg analysis of data on the funds' websites. Valkyrie Investments nearly halved its fee to 0.25% from the 0.49% it charged immediately before the SEC approval. Franklin Templeton now offers an industry-low interest rate of 0.19% after reducing its initial management fee by 10 basis points. Only Bitwise has not made any change.
Bitcoin has soared this year, surpassing $63,000, as retail investors worried about missing out snapped up the new ETFs. As companies push to secure market share in an emerging asset class, this divide among fund managers is likely to continue.
“I expect further concentration among the top ETFs,” said Bryan Armour, head of passive strategies research at Morningstar Inc. “But others won’t go down without a fight.” The fee war should continue, putting pressure on leaders will increase to maintain their advantage.”
Grayscale Investment has taken a different approach since converting its Bitcoin trust into an ETF, choosing to maintain a higher management fee than its new competitors. His fund (GBTC) has seen outflows of more than $8 billion since launch, data compiled by Bloomberg show.
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“The Grayscale team anticipated that GBTC's diverse shareholder base would take profits and deploy investment strategies that would impact the trust's inflows, and we are pleased that outflows have stabilized over time,” said a Grayscale spokesperson said in a statement. “We expect GBTC to continue to be a primary capital market risk transfer vehicle for Bitcoin.”
Sales have broadly slowed, with daily outflows falling from $403 million in January to a daily average of $138 million in February. And Greyscale remains the largest fund, with $26 billion in assets under management, compared to BlackRock's $10 billion.
Meanwhile, there are signs that BlackRock is overtaking Fidelity and dominating the sector.
The New York-based firm's IBIT fund attracted $612 million in new investments on Feb. 28, the most in a single day since its launch, and it has attracted the most new inflows in the last month.
The distribution network of the world's largest fund manager may offer investors better liquidity than most competitors, said Todd Sohn, ETF and technical strategist at Strategas Securities.
“The inflows and volumes of the BlackRock product reflect their commitment to this asset class,” Sohn said. “I like to think they recognize that this is a 'new' part of an investment portfolio and that they are there to give investors the access they want.”
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