BlackRock’s iShares Bitcoin Trust has emerged as the world’s largest fund for the original cryptocurrency, amassing nearly $20 billion in total assets since its US listing at the start of the year.
As of Tuesday, the exchange-traded fund (ETF) held $19.68 billion worth of Bitcoin, surpassing the $19.65 billion Grayscale Bitcoin Trust, according to data compiled by Bloomberg. Fidelity Investments holds the third largest position with an $11.1 billion Bitcoin offering.
Market analysts have closely monitored the capital flows into BlackRock’s ETF and out of the Grayscale Bitcoin Trust since US regulators approved the launch of nine new ETFs and the conversion of Grayscale’s publicly-traded trust into an exchange-traded product on January 10.
The Securities and Exchange Commission (SEC), led by crypto skeptic Gary Gensler, had rejected spot Bitcoin ETFs for over a decade due to concerns about market manipulation. However, the SEC approved them in January after Grayscale Investments won a court challenge last year.
Despite this initial victory, Grayscale has faced steady outflows since its newly converted ETF began trading on January 11.
BlackRock’s swift ascension in the highly competitive spot Bitcoin market “is a reminder that being the first mover doesn’t necessarily mean that someone ends up as the biggest winner,” stated Aniket Ullal, head of ETF data and analytics at CFRA. He pointed out that early entrants like Grayscale can suffer from legacy disadvantages.
Grayscale has struggled with challenges such as selling pressure and a higher fee of 1.5%, significantly above the average fee of about 0.25% charged by its newer competitors, including Fidelity Investments and ARK Investments.
Conversely, BlackRock has leveraged its robust distribution network among independent financial advisors and wealth managers. “We’re seeing significant assets moving into the ETF from the wealth community,” said Jay Jacobs, U.S. head of thematic and active ETFs, to Reuters ahead of the Bloomberg report.
Jacobs explained that many early adopters transitioned from direct cryptocurrency ownership to investing in BlackRock’s iShares Bitcoin Trust. “Some of those accounts had millions of dollars invested in the cryptocurrency,” he noted.
While hedge funds reported substantial positions in the new ETFs at the end of the first quarter, other institutional investors have been slower to embrace these new Bitcoin ETFs. “We know that this is going to be the longest process,” Jacobs remarked regarding institutional buyers. “In some cases, it could take years,” he added.