Bitcoin ETF — EU 🇪🇺 market overview, performance & expectations for the US 🇺🇸 market.
Bitcoin ETFs have been all the rage recently, with over 10 most reputable asset managers in the United States all filing for applications with the Securities and Exchange Commission (link), including BlackRock Asset Management, Wisdom Tree, Bitwise, Greyscale and Galaxy Invesco among others. With this note,— we would like to present a market update on the current structure of Bitcoin ETFs in North America and Europe, and evaluate whether or not fund flows from Europe and Canada justify all of the hype reverberated in crypto media.
Additionally, we need to clarify that the current filings are in fact Exchange Traded Products ETPs and not Exchange Traded Funds, maybe irresponsibly promulgated en-masse without doing proper due diligence, most community boards calling spot BTC an exchange traded fund. Let’s take a closer look at all currently available market products and break down their structure.
What is a difference ? Well, Exchange-traded products (ETPs) — including exchange-traded funds (ETFs), exchange-traded notes (ETNs) and some other similar product types — are all investment vehicles that are listed on exchanges and can be bought and sold throughout the trading day from 9am — 4pm like a stock. Bitcoin would be no different. These products are meant for both retail and institutional investors.
First, we need to clarify that a proposed Bitcoin spot ‘ETF’ is in fact an ‘ETP’ — an exchange traded product and in the next paragraph we will outline investment characteristics and market making features of this financial instrument, comparing it to ‘ETF’ — an exchange traded funds.
EXCHANGE TRADED PRODUCTS
📍 ETPs track the performance of underlying assets or benchmarks.
📍 ETFs are pooled investment opportunities.
📍 ETPs are registered vehicles that offer both primary and secondary trading, in the primary market — where newly issued securities are sold to investors and more commonly, through transactions that occur in the secondary market — where existing securities are bought and sold — through transactions on an exchange or other venues.
EXCHANGE TRADED FUNDS
📍 ETF invest directly in the underlying securities.
📍 ETFs are indexed, and open ended funds.
📍 ETFs are called exchange traded funds, similar to mutual funds, but are registered with Investment Company Act of 1940, and are traded on market exchanges like other financial assets like stocks, bonds and commodities.
In the next section, we would like to provide a market update, and report on the fund flows of the current Bitcoin Exchange Traded Products, that have been available for investing in both Europe 🇪🇺 and Canada 🇨🇦.
Expectations for #Bitcoin ETP market-place and growth should be tapered, for example, one of the most reputable European financial companies we can see #21Shares BTC ETP (Ticker $CBTC) have grown to ~ $7 million in AUM. Management fee is 20 basis points, the Inception Date 06/22 and $CBTC trades on (4) European exchanges: ○ SIX Swiss Exchange ○ Euronext Amsterdam ○ Euronext Paris ○ Deutsche Boerse.
🔗 https://21shares.com/product/CBTC
Canadian #Bitcoin ETP (Ticker $BTCQ) is somewhat larger in size, by #3IQ has accumulated ~ 75 million in AUM $CAD. Management fee is 100 basis points, the Inception date 03/2021 and $BTCQ trades on (1) Canadian exchange ○ Toronto Stock Exchange.
🔗 https://3iq.io/3iq-bitcoin-etf-btcq-2
If we take an entire market place as an aggregate, ETFbook is providing a best in class data, we can see per the chart below that European market place has accumulated some 5.4 billion Euro, the next chart broken down by issuers, ISIN, currency, provider, type of product, management fee, and the assets under management.
The market chart is showing assets under management, domiciled in Euros, however doesn’t take into account new subscriptions, but is reflective of the amount of $FIAT denominated growth in European markets, on aggregate. The fund inception dates vary for each investment vehicle, but most BTC ETPs have been launched between 2021 and 2023, with total assets under management growing from 4 billion Euro to 5.4 billion Euro over the past 12 months, a tepid increase of 35% — including BTC performance.
Another topic, worth mentioning here, is that fund structure of the exchange traded products tracking Bitcoin performance are both Physical ETP’s and Synthetic ETP’s. The difference between them lies in the way they replicate the underlying performance: by owning the underlying, in the case of physical replication, or through derivatives and swaps, in the case of synthetic replication. The clearing house for ETPs are the major stock exchanges (see the chart 1), and custodians / brokerages would vary.
Also, one last topic and an important consideration when evaluating performance of Bitcoin ETPs (not have data presented here) is the net new flows NNF (fund subscriptions minus fund redemptions). We can chart AUM growth adjusted for price increases / decreases in Bitcoin performance to arrive at a true demand for EPTs over this period of time.
Fundamental analysis is paramount to study, before we make capricious conclusions that both institutional and retail demand for exchange traded products could drive BTC valuation higher. As of September ’23, BTC exchange traded products account for ~ 1% of the total market capitalization, and from these figures we should not expect that approval of ETPs in the United States would deviate much from the European market place in growth and performance. Also noteworthy, is that ETP management fees range anywhere from 1% to 2.5% annually, which is rather expensive, for blockchain and digital assets. Many institutional funds might opt to hold BTC directly via third parties, and custodial service providers.
If you would like to make a contribution to Cryptoken Board UÜ research desk to help us continue to publish best in class reporting — via:
BTC address: 15DvCYNZ9CKYa5U4P7x9dCQYXsEw8BTb2q
LTC address: LSegtjuDRyp6wVmQ2JLAkp3JWBZGt23Zqe
Contact
cryptoken_board@pm.me
Twitter
https://twitter.com/cryptoken_board
Telegram
https://t.me/cryptokenboard
