The success of Bitcoin spot ETFs in the United States has caused a decline in the popularity and profitability of European Bitcoin ETPs. Despite a significant increase in demand for Bitcoin globally, European spot Bitcoin ETPs have experienced net outflows totaling $500 million in the current year. This has also impacted other cryptocurrency ETPs, with only $42 million in net inflows for Ether and altcoins, failing to compensate for the losses of Bitcoin ETPs in Europe. However, client queries for European Bitcoin investment products have increased since January when long-awaited Bitcoin spot ETFs were approved in the United States, providing easier access to spot Bitcoin price exposure for U.S. institutional investors.
The U.S. Bitcoin spot ETFs, which went live on January 11, have collectively attracted $13.6 billion in net inflows, with the majority coming from funds managed by BlackRock and Fidelity. These funds charge ultra-low annual management fees of 0.25%, creating a new fee environment in Europe where providers must reduce costs to remain competitive. Institutions that have refused to lower fees have experienced significant losses, such as the Grayscale Bitcoin Trust which has seen a decline in its Bitcoin holdings and lost its title as the world’s largest Bitcoin ETF to BlackRock.
Canada’s Purpose Bitcoin ETF, which was the first and largest in the world prior to January, has also experienced a decrease in Bitcoin holdings and charges a 1% management fee. European companies like VanEck have seen small net inflows for their Bitcoin and Ethereum ETNs since January, despite being behind one of the ten Bitcoin funds launched in the United States earlier in the year. While European crypto ETPs are still relatively larger than spot Bitcoin ETFs in the U.S. in terms of potential market size, they are struggling to compete with the success of U.S. funds that offer lower fees and easier access to spot Bitcoin price exposure for institutional investors.
The success of U.S. Bitcoin spot ETFs has raised concerns for European providers, who now have to adjust their fee structures to remain competitive in the market. The fee war initiated by the U.S. funds has highlighted the importance of offering low-cost investment options to attract and retain institutional investors. This shift in the market has led to a decline in the profitability of European Bitcoin ETPs, as investors gravitate towards U.S. funds that offer lower fees and greater accessibility to spot Bitcoin price exposure. Despite this, European providers are still optimistic about the potential market size and opportunities for growth in the cryptocurrency ETP sector, as demand for Bitcoin and other cryptocurrencies continues to rise globally.
