BlackRock and Fidelity continues to see inflows for their spot Bitcoin ETFs eating the market share from Grayscale as GBTC continues to bleed amid high management fees.
On February 7, the spot Bitcoin ETF products recorded their ninth straight day of net positive inflows. As per data from Farside Investors, yesterday’s inflow was the highest for the month of February so far, at a hefty $145 million. Interestingly, this also coincides with Bitcoin’s 4% price rally to $44,500.
Fidelity’s FBTC led the pack with a notable $130 million in net inflows, marking its highest since January 31. With this, Fidelity’s net inflows stand at a staggering $2.7 billion to date. In contrast, BlackRock’s IBIT saw a more modest $56 million net inflow, but its overall net inflows remained substantial at $3.3 billion.
However, GBTC experienced a minor net outflow of $81 million, exacerbating its total net outflows to -$6.2 billion, as reported by Farside Investors. Despite this, the collective net inflows for Bitcoin ETF products reached a robust $1.7 billion, underscoring continued investor confidence in this sector.
BlackRock and Fidelity Lead the Show
JPMorgan’s research report revealed that Blackrock (BLK) and Fidelity spot Bitcoin (BTC) exchange-traded funds (ETFs) appear to hold an advantage over Grayscale in certain liquidity metrics related to market breadth.
Despite a slowdown in outflows from Grayscale’s GBTC in the fourth week following approval by the US SEC, the fund is likely to face stiff competition from the newly introduced ETFs. The major competition comes from Bitcoin ETFs offered by two top players, Blackrock and Fidelity.
This competition is contingent upon Grayscale making substantial reductions to its fees. Otherwise, GBTC will continue to bleed amid high management fees. Currently, Grayscale imposes the highest fees among spot Bitcoin ETF issuers. Even though it lowered its management fee from 2% to 1.5% as part of its transition to a spot Bitcoin ETF, it remains significantly more expensive than its competitors. JPMorgan analysts led by Nikolaos Panigirtzoglou wrote:
“An additional reason beyond fees is that the Blackrock and Fidelity ETFs are already commanding an advantage vs GBTC in terms of two liquidity metrics.”
JPMorgan employs two metrics to gauge market breadth and liquidity in ETFs. Firstly, the Hui-Heubel ratio serves as a proxy for market breadth, with GBTC exhibiting a value approximately four times higher than that of Blackrock and Fidelity ETFs. This suggests that the latter ETFs demonstrate considerably more market breadth compared to GBTC.
Secondly, the analysis considers the “average absolute deviation” of ETF closing prices from net asset value (NAV). Recent data indicates that the ETF price deviation from NAV for Fidelity and Blackrock spot bitcoin ETFs has approached levels seen in the GLD Gold ETF, thus indicating a notable enhancement in liquidity. Conversely, deviations for the GBTC ETF remain high, indicating lower liquidity.