Slow Start for Third Bitcoin ETF, Lower Costs Could Attract More Capital

The latest bitcoin (BTC) futures exchange-traded fund (ETF) to be launched in the US – the VanEck Bitcoin Strategy ETF (XBTF) – has had a slow start compared to its two earlier competitors, ProShares’ BITO and Valkyrie’s BTF. But lower costs and a stronger brand should attract more capital over the long-term, some analysts argue.

When ProShares launched the first bitcoin futures ETF, BITO, on October 19, it was quickly deemed one of the most successful ETF launches of all time in the US. The fund saw a turnover of almost USD 1bn in the first day of trading, ranking it behind only a BlackRock carbon fund on the list of the most popular ETF launces in the country.

Over the first two days of trading, BITO amassed USD 1.1bn under management – the quickest an ETF has ever done so, according to a report by Bloomberg. Since the launch, assets managed by BITO have for the most part lingered between USD 1.3bn and USD 1.4bn, Bloomberg said, while noting that the second ETF, Valkyrie’s BTF, had amassed just USD 60m at the time of writing.

For VanEck’s new bitcoin ETF, however, things have been different, to say the least. Despite coming with a significantly lower management fee of 0.65%, compared with 0.95% for BITO and BTF, the new fund saw a trading volume of just USD 4.8m on its opening day – a world away from the USD 1bn that BITO saw during its debut.

Commenting on the launch, Bloomberg’s own ETF expert Eric Balchunas said that about USD 5m on day one would normally “be pretty good.” However, it is being “shadowed by the absurd USD 1bn BITO laid down, not to mention USD 78m that BTF did,” Balchunas added.

$XBTF traded about $5m on Day One. Normally that would be pretty good, prob Top 10% of launches this year. It's just shadowed by the absurd $1b $BITO laid down, not to mention $78m that $BTF did. pic.twitter.com/bjqrUnThzr

— Eric Balchunas (@EricBalchunas) November 16, 2021

And while the third ETFs debut was less stellar than the first two, it could still gain some ground compared to the other two as time goes by, other experts Bloomberg spoke with have argued.

“I imagine VanEck will pick up some money because brand matters, and VanEck’s is spotless, Dave Nadig, Chief Investment Officer at data-provider ETF Trends said. He added that “price matters” and that “30 basis points is a lot,” referring to the significant difference in the annual fees charged by the three ETFs on the market so far.

Meanwhile, crypto analysis company CryptoCompare wrote in a report published on Tuesday that total investment inflows into bitcoin-based investment products surged during the month of October.

Excluding the more than USD 1bn that have been invested into ProShares’ new bitcoin ETF, fund inflows for bitcoin reached almost USD 800m, the report said. It added that the digital asset with the second-highest inflows, solana (SOL), saw just USD 36.4m during the same period.

“Current AUM [assets under management] for BTC-based investment products (spot markets only) now stands at over USD 50bn – 4.3% of the total BTC market capitalization,” the report said.

At 13:53 UTC, BTC traded at USD 60,561, being unchanged over the past 24 hours and down 10% over the past 7 days.
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Learn more:
– First Bitcoin ETF Booms, BTC Nears USD 65,000
– Bitcoin Falls as Second Bitcoin ETF Goes Live in the US

– This Is Why Bitwise Withdrew BTC Futures ETF
– Australian Crypto-Focused ETF Hits Record, Spot-Based BTC, ETH ETFs Expected

– Here’s What You Need to Know About the Bitcoin Futures ETF
– MicroStrategy’s and Grayscale Bitcoin Trust’s Shares Now Compete with ETFs