BlackRock and Fidelity Profit from Bitcoin ETF FOMO

Spot Bitcoin ETFs saw record inflows after Bitcoin's surge, making them investor favorites in this new asset class. Since the US Securities and Exchange Commission approved the “Newborn Nine” exchange-traded funds that invest directly in Bitcoin on Jan. 10, BlackRock Inc.’s iShares Bitcoin Trust (IBIT) and Fidelity Investments’ Wise Origin Bitcoin Fund (FBTC) have captured 79% of total inflows.

According to Bloomberg examination of fund websites, four of the remaining seven funds have lowered costs below the two toppers. Valkyrie Investments virtually cut its fee to 0.25% from 0.49% before SEC clearance. After cutting its initial management charge by 10 basis points, Franklin Templeton provides a sector-low 0.19%. Only Bitwise remained unchanged.

Bitcoin soared to $63,000 this year as individual investors bought the new ETFs to avoid missing out. This fund manager split is likely to persist as firms compete for market share in a growing asset class.

“I expect further concentration among the top ETFs,” said Morningstar Inc. director of passive strategies research Bryan Armour. Others won't surrender easily. Fee wars should continue to pressure leaders to maintain their advantage.”

Since its Bitcoin trust became an ETF, Grayscale Investment has maintained a higher management charge than its new rivals. Bloomberg data shows almost $8 billion in outflows from its fund (GBTC) since debut.

“The Grayscale team anticipated GBTC's diverse shareholder base would engage in profit-taking and deploy investment strategies that would impact the Trust's flows, and we are pleased that outflows stabilized over time,” a spokeswoman said. We expect GBTC to remain a Bitcoin capital markets risk transfer mechanism.

Selling has slowed to $138 million per day in February from $403 million in January. Greyscale remains the largest fund with $26 billion under administration, compared to BlackRock's $10 billion.

There are indicators that BlackRock is surpassing Fidelity in the area. New York-based firm's IBIT fund won $612 million on Feb. 28, the biggest since launch, and took in most new flows last month.

Todd Sohn, an ETF and technical strategist at Strategas Securities, said the world's largest fund manager's distribution network may provide investors better liquidity than most rivals.

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