Valkyrie and VanEck come to the party
The US is getting two more bitcoin futures ETFs, thanks to launches this week from VanEck and Valkyrie.
The funds will all be structured the same way as the ProShares Bitcoin Strategy ETF (BITO), buying front month bitcoin futures. The only substantive difference will be fees. And on this score, VanEck is white anting the market, listing XBTF at an 0.65% fee.
BTF is an interesting story. The company Valkyrie, a Tennessee based crypto specialist, expected to be the first bitcoin ETF to market thanks to advantages that the SEC provides to smaller businesses launching in confidentiality. But for whatever reason, delays caused it to come second.
BTF has seen a tiny fraction of the interest that BITO has, clocking in just one-fifth of BITO’s trading volume on day 1. It is anticipated that VanEck’s will do slightly better as the fee is lower and it is an established brand.
Bernie’s commentary – First mover advantage not as important as you think
Standard industry wisdom in ETFs is that first mover advantage is crucial. If you’re first to market, you bring on all the initial trading. This then lowers spreads, which make your ETF cheaper to trade. And the cheaper trading costs incentivise yet further trading. In this way, first mover advantage is thought to generate a liquidity snowball. Everyone seems to be thinking that this is what’s happening with bitcoin ETFs in the US.
But lessons from elsewhere are a bit mixed. In Canada, which has had physical bitcoin ETFs for a while, Purpose Investments got in first clocked up $1 billion at breakneck pace. For a moment, it looked like they had won the Hunger Games. However then along came 3iQ, a small local bitcoin ETF specialist. Its BTCQ gathered over $1 billion as well. Then CI Financial, a major Canadian asset manager, listed one too which now has $400 million. There was more than one winner.
In Europe the story was similar. The winnings of bitcoin ETFs have been spread between Coinshares, ETCgroup, WisdomTree and 21Shares. There was no winner takes all moment.
So will winner take all in the US? I’m not so sure. It seems a bit too early to tell. But from global experience I think it’s safe to guess that things other than getting in first will also matter. And given the limitations of the futures-based structure, I’m somewhat surprised these bitcoin futures ETFs have done as well as they have, but hey if i knew what i was talking about i would still be holding the bitcoins I bought at $300!