Fidelity's FBTC And Bitwise's BITB Stand Out Among Spot Bitcoin ETFs

Summary Spot Bitcoin ETFs have seen impressive inflows and increased assets under management since gaining SEC approval. BlackRock's iShares Bitcoin Trust, Grayscale Bitcoin Trust, and Fidelity Wise Origin Bitcoin Fund have been the dominant funds in terms of assets under management and net flows. Fidelity's FBTC and Bitwise's BITB are top picks among spot Bitcoin ETFs due to Fidelity's self-custody approach and Bitwise's low fees and transparency. Since gaining the SEC approval, the spot Bitcoin ETF has been the epicenter of discussions in the crypto community and news media. The underlying asset, Bitcoin USD ( BTC-USD ), has been seeing a bit of a "sell the news" price action; however, there is still reasonable momentum, considering the upcoming halving event. Spot vs Future Bitcoin ETF Market Share (theblock.co) Spot Bitcoin ETFs have continued to record impressive inflows and the assets under management (AuM) of the respective funds have seen an increase since the start of trade. Latest Bitcoin ETF market share data shows, spot Bitcoin ETFs command a dominant ~82% volume. The spot Bitcoin ETFs have continued to hit milestones. In a very short timeframe, the spot Bitcoin ETFs have overtaken silver in AuM, becoming the second-largest ETF commodity. The SEC's approval of 11 different spot Bitcoin ETFs at once opened the doors for healthy competition among the funds and provided an array of choices for investors. Unsurprisingly, some funds have shown more dominance than others. BlackRock's iShares Bitcoin Trust ETF ( IBIT ), Grayscale Bitcoin Trust ((BTC)) ETF ( GBTC ), and Fidelity Wise Origin Bitcoin Fund ETF ( FBTC ) have been the three dominant funds in terms of AuM and net flows. Spot Bitcoin ETF Comparison Table (Cointelegraph) A major draw for investors among the spot Bitcoin ETFs has been the expense ratio. It has been a factor heavily compared among funds by investors. I pointed out in an article I wrote days before the ETFs were approved, that expense ratios will be one of the defining factors when the spot Bitcoin ETFs get the green light. Leading up to the approval, issuers actively revised their fee structures, except Grayscale which opted to stick to a 1.5% fee for its spot Bitcoin ETF shares - the highest fee among spot Bitcoin ETFs. Spot Bitcoin ETFs Net Flows and AuM (CoinShares) Despite Grayscale currently having the largest AuM among spot Bitcoin ETF issuers, the fund has been experiencing outflows due to perceived high fees. In the past week, GBTC recorded ~$2.23 billion in outflows, while IBIT and FBTC saw impressive inflows of $931 million and $860 million, respectively. Grayscale's outflows have become more pronounced , with a record $640 million leaving the funds in a single day on January 23. Investors are weighing heavily things like liquidity and track record and who the actual issuer is behind the product. Grayscale is a crypto specialist. And it has really paved the way for a lot of these products coming through. Michael Sonnenshein, Grayscale CEO Those were the comments of Grayscale's CEO, Michael Sonnenshein, in a CNBC interview at the World Economic Forum in Davos, Switzerland. I partly agree with his assessment. Despite the CEO's confidence in Grayscale's enormous AuM and track record, I believe that if fees are not revised lower, especially considering the competition from other funds with lower fees, investors would increasingly shift their preferences toward more cost-effective funds. This is already happening as GBTC has been recording outflows while lower-fee ETFs have been seeing inflows. My top picks for potential inflows among the spot Bitcoin ETFs are FBTC and Bitwise Bitcoin ETF ( BITB ). Fidelity brings a wealth of experience to the table, going into crypto research since 2014, creating its institutionally-focused digital asset unit Fidelity Digital Asset in 2018, and launching a digital assets platform in late 2022. Among the spot Bitcoin ETF issuers, Fidelity is the only issuer that self-custodies its Bitcoin holdings. This self-custody approach, in my view, would make investors consider FBTC as a viable choice to spread their risk in terms of issuer asset custody, as all but two of the other issuers use Coinbase as their digital asset custodian. And all the other issues use a third-party custodian. Fidelity's robust range of investment, trading, retirement, and wealth management platforms and packages, which includes Fidelity Crypto and Individual Retirement Account (IRA) packages, positions the issuer to become a go-to platform for offerings such as including Bitcoin in IRAs, now than a traditional vehicle to access crypto has been approved. While some detractors believe digital assets won't be included in IRAs, I, however, believe that at this stage, it would be ill-advised to bet against BTC. Bitcoin has come a long way as an asset class, from an emerging technology just over a decade ago to becoming mainstream today. Since the approval of the spot Bitcoin ETFs, FBTC has continued to show impressive numbers. FBTC became the second fund to hit $1 billion in inflows, following IBIT. FBTC hit $1.6 billion in inflows yesterday (January 24th), trailing behind IBIT's $1.9 billion recorded inflows. BlackRock and Fidelity are the front-runners and currently command 70% of the market. Fidelity's range of platforms and its existing crypto presence and experience make it a top pick among the ETFs. Another issuer that brings a wealth of experience to the table and currently follows the front-runners is Bitwise. The Bitwise Bitcoin ETF boasts the lowest fee among spot Bitcoin ETFs, at 0.2% or 20 bps, and a six-month fee waiver on the fund's first $1 billion in assets. Proof that fees are an important factor for investors was shown on the first trading day when BITB (the lowest-fee spot Bitcoin ETF) recorded the highest inflow. Like the front-runners, BITB is also on its way to reaching $1 billion in inflows and has passed $500 million in inflows. Considering Bitwise's existing repertoire of crypto-based ETPs, the fund's expertise in creating crypto-based investment funds positions it advantageously. Some of Bitwise's existing products include Bitwise Crypto Industry Innovators ETF ( BITQ ), Bitwise 10 Crypto Index Fund ETF ( BITW ), Bitwise Web3 ETF ( BWEB ), and Bitwise Ethereum Strategy ETF ( AETH ), among others. The combination of experience and investor-friendly fees makes Bitwise a notable contender among spot Bitcoin ETFs. Transparency has always been a key issue among custodial crypto exchanges. The FTX fiasco of 2022 was an eye-opener and has since prompted calls for transparency and reporting of asset holdings using proof-of-reserves . Bitwise is setting the pace for transparency among the spot Bitcoin ETFs, being the first fund to publish the on-chain address of BITB Bitcoin holdings, which allows anyone to verify BITB's holdings and flows directly on the blockchain. BITB's proof-of-reserves attestation will be provided by the Hoseki app, a firm that specializes in providing on-chain proof of funds attestation. I believe that this move by Bitwise will foster greater trust among investors, mitigate the risk of mismanagement of funds, and add to the fund's reputation. Based on these qualitative factors, I consider Fidelity's FBTC and Bitwise's BITB as the top picks among the spot Bitcoin ETFs.