(Bloomberg) — In what has been a record year for Bitcoin, the creators of the world’s first exchange-traded funds holding the cryptocurrency appear at risk of being left behind.
Bloomberg’s Most Read
Bitcoin ETFs launched in Canada in February 2021, making them the first in the world. This generated billions of dollars in inflows from Canadian and foreign investors who wanted exposure to the original digital currency. But when US Bitcoin ETFs were approved earlier this year, some investors began to reconsider their investments in Canadian cryptocurrencies.
Canadian Bitcoin ETFs have seen net outflows of C$578 million ($405 million) so far this year through Dec. 13, according to data compiled by TD Securities Inc. Crypto ETFs are the only ETF category in Canada seeing outflows this year, while US ETFs. Bitcoin ETFs have seen a record $36 billion in inflows through December 16. Bitcoin is up more than 150% this year.
Some American investors who had invested in Canadian Bitcoin ETFs have now switched to Americans, according to Vlad Tasevski, head of asset management at Purpose Investments Inc., which had the world’s first Bitcoin ETF.
“Large US and international investors now prefer to use US ETFs because those are the markets in which they predominantly trade all their other exposures,” Tasevski said. “But that was to be expected because in the end we know that the United States is the largest capital market in the world, and that is where most of the liquidity is.”
While the Purpose Bitcoin ETF (ticker BTCC) has seen international investor outflows this year, Tasevski said there has been a slight net increase in flows from Canadian investors, who represent more than 80% of the client base for approximately $830 million. of Canadian dollars. finance.
For Canadian investors, the weakness of the Canadian dollar may be helping them keep their investments in the country. Canadians prefer to invest in their local currency and Canadian Bitcoin ETFs can be denominated in Canadian dollars and be hedged, according to Andrés Rincón, head of ETF sales and strategy at TD Securities.
“What Canadian ETFs really offer are options to manage your currency risks over the long term, and that’s something that’s really unique to Canadians,” Rincón said.
For investors switching to US Bitcoin ETFs, one of the potential benefits is lower management fees. The Fidelity Advantage Bitcoin ETF has the lowest management expense ratio of the Canadian Bitcoin ETFs, at 0.43%, while many others have ratios above 1%. The iShares Bitcoin Trust ETF, the largest US Bitcoin ETF, has a sponsorship fee of 0.25%.