Round Two of Inflows Into Bitcoin ETFs Coming: Hougan

With the launch of spot bitcoin ETF story successfully wrapped up, the next stage—widespread adoption by advisors and institutional investors—will bring a fresh surge of inflows into the funds, experts say. 

Since their launch in mid-January, the novel spot bitcoin ETFs have brought in about $3.2 billion, according to Bloomberg data, making it the fastest growing launch in terms of inflows of all time. 

Another wave of inflows is coming, as the funds take the big, complicated step of moving on to broker-dealers' platforms and are adopted by institutional investors, according to Matt Hougan, chief investment officer of Bitwise Asset Management.

“I actually think there’s going to be a secondary acceleration in the next few months when the [spot bitcoin ETFs] get on national account platforms,” Hougan said while on a panel at the ETF Exchange Conference in Miami on Feb. 13

Bitcoin ETFs, in which issuers actually own the cryptocurrency, were first issued Jan. 10 after the first application for one was submitted more than a decade ago. Eleven firms launched funds on Jan. 11, making for a fierce fee and marketing war that continues to play out. Thus far, the iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) have accumulated the most assets, while Grayscale’s Bitcoin Trust ETF (GBTC) has bled billions partially due to its high fee.

A handful of major asset managers, most prominently Vanguard, have said they will not be offering the ETFs for trade on their platforms. Hougan said on the panel he expects Vanguard to eventually change its mind about rejecting bitcoin and other cryptocurrency.

Spot Bitcoin ETF Fast Followers

Winning over financial advisors and institutional clients will be another step to open the floodgates, said the executives. “Some are going to be fast followers, and some are going to be slower if they even adopt at all,” explained Global Head of ETFs at Grayscale David LaValle on the panel. Hougan predicted that even the financial advisors who do allocate into crypto will likely be invested at 1% to 5% of the portfolio.

During the panel, moderator and Bloomberg ETF analyst Eric Balchunas pushed LaValle on what “the deal” was with GBTC's fees, the highest among its peers. The expense ratio currently rests at 1.5%, while competitors are in the 20-to-30 basis point range. LaValle said the question was “fair” but added that fees are just one metric investors look at, others being liquidity and a firm’s track record in the ETF space.

As for the next anticipated regulatory battle in the cryptocurrency ETF world, the ethereum ETF, Hougan, LaValle, and Galaxy’s Global Head of Asset Management Steve Kurz all said they see the approval odds at 50/50 by the SEC’s May deadline.

Contact Lucy Brewster at [email protected].