Bitcoin ETF - BlackRock Reaches $20 Billion

BlackRock’s Bitcoin ETF has overtaken its competitor Grayscale by accumulating $20 billion in assets.

300,000 bitcoins for BlackRock

It’s done, BlackRock manages the world’s largest fund invested solely in bitcoin: the IBIT ETF. The latter hosts nearly 300,000 bitcoins.

It’s a phenomenal success. Fidelity’s IBIT and FBTC ETFs amassed $6.5 billion in their first month of trading. That’s more than each of the 5,500 other ETFs launched before them.

IBIT is by far the best ETF launch in history. The following chart shows the massive gap between IBIT and the second fastest ETF in history to reach $20 billion in assets.

JPMorgan’s JIPO ETF took 985 days to reach $20 billion, compared to just 137 days for BlackRock’s ETF:

Blackrock's #Bitcoin ETF is the most sucessful ETF launch of all time.

Do you think Vanguard noticed? pic.twitter.com/9yrg2HUEls

— Thomas | heyapollo.com (@thomas_fahrer) May 29, 2024

These numbers would need to be adjusted for inflation to be precise, but the result would remain unequivocal. Even Fidelity’s FBTC ETF, with already over $11 billion, is on track to beat the previous record.

However, it should be noted that a substantial portion of the funds raised by BlackRock came from the GBTC trust that already existed… So the Bitcoin ETFs slightly “cheated”.

GBTC dethroned

When the nine new Bitcoin ETFs were introduced in January, Grayscale’s GBTC trust already held 620,000 BTC! This trove represented $29 billion at the time. This head start is due to the fact that the GBTC trust has served as an alternative to ETFs since 2013.

Today, Grayscale only holds 280,000. This redistribution from the GBTC ETF to its competitor IBIT is due to BlackRock offering significantly lower management fees. They are 0.2% compared to 1.5% for Grayscale. That is 7.5 times more!

Despite these painful fees, the Grayscale Bitcoin Trust (GBTC) ETF has held its ground. Although investors have withdrawn more than 330,000 BTC, things have stabilized over the past five weeks. The hemorrhage seems to be over.

Thus, Grayscale’s strategy would have paid off if we stop here. Aligning with BlackRock’s fees would certainly have allowed them to keep all 620,000 bitcoins (worth $43 billion at the current rate), but revenues would be much lower.

Indeed, even if the remaining 280,000 bitcoins in the GBTC ETF represent “only” $20 billion, let’s remember again that the management fees are 7.5 times higher…

Fees of 1.5% on $20 billion give us $300 million, while 0.2% on $43 billion give us only $86 million. QED.

1 million bitcoins = 1 Nakamoto

American ETFs collectively hold over one million bitcoins. Equivalent to nearly $70 billion.

However, net inflows since January 11 were only $14 billion. The disparity comes from the $43 billion already invested in the GBTC trust and the marked appreciation of bitcoin since January 11.

In other words, it took just $14 billion to drive up bitcoin by 50%. At this pace, some estimate that we will reach $135,000 by the end of the year. Here are two highly illustrative charts to convince you.

You can see the nearly perfect correlation between inflows into ETFs and the price of bitcoin (left chart). The extrapolation advocating for $135,000 (right chart) is based on the assumption that ETFs will attract $35 billion (net) by December 31:

#Bitcoin ETFs are growing at a rate of about $100 million per day. That implies Bitcoin = $135,000+ by year-end.*

*assuming the trend and relationship hold pic.twitter.com/E5jW19zJbD

— Timothy Peterson (@nsquaredvalue) May 29, 2024

Obviously, profit-taking could be more significant than anticipated on the road to $135,000.

Nevertheless, many investment funds are making similar predictions. Starting with Alliance Bernst ein ($700 billion) which expects $90,000 by the end of the year, then $150,000 in 2025.

The same goes for Standard Chartered Bank which anticipates net inflows of $50 to $100 billion for 2024. Enough to break the $100,000 mark this year and aim for $200,000 the following year.

The UK fund CrossBridge Capital, for its part, suggests that Bitcoin will reach $250,000 in the next 3 to 5 years.

These predictions are realistic if we believe the CIO of Bitwise (a Bitcoin ETF). Matt Hougan estimates that the $14 billion in net inflows since January 11 are just an “appetizer”.

This is all the more true since ETFs have already won over a record number of major investors (over 1,000). Notably Morgan Stanley bank and the Wisconsin state pension fund.

And speaking of large investment banks, Goldman Sachs declared this Thursday that the SEC’s ETF approval was “a psychological turning point”. It’s a “stunning success”.