World’s first Bitcoin ETF (“Purpose Bitcoin ETF”) has crossed $1billion in AUM within one month of its launch. The Purpose Bitcoin ETF was approved in Canada and launched in mid-Feb 2021 on the Toronto Stock Exchange.
This Bitcoin ETF is managed by Purpose Investments, Canada and it invests directly in physically settled Bitcoin, not derivatives. It allows investors easy and efficient access to cryptocurrency without the associated risk of self-custody within a digital wallet.
The funds management fees is 1% which is half the cost of popular Grayscale Bitcoin Trust which charges an annual fees of 2% . Grayscale Bitcoin Trust is largest public holder of Bitcoin, but with launch f ETFs, it is expected the popularity will go down.
Purpose is an asset management company with more than $11 billion in assets under management. Purpose is already reaping the rewards of being first to market with its bitcoin ETF. A second bitcoin ETF, Evolve ETFs, also launched in Canada just one day after Purpose and now has $85 million in assets AUM as of Mar 20, 2021.
The race to launch a bitcoin ETF in the US has been on for years, but the SEC has denied applications from investment firms. Bitcoin ETF applications from VanEck, Wisdom Tree, and others are currently under review by the SEC and a decision could come within the next 45 days.
What is ETF: An ETF is a security type that holds underlying investments such as commodities, stocks, or bonds. It often resembles a mutual fund, as it is pooled and managed by its issuer.
Grayscale’s Bitcoin Trust Fund (GBTC) is the leader in the cryptocurrency market, with $35 billion in assets under management. But it is an Investment Trust and not the ETF. As a result, GBTC shares cannot easily be created, neither is there an active redemption program in place. This tends to generate significant price discrepancies from its Net Asset Value, which is the underlying BTC fraction represented.
An ETF instrument is far more acceptable to mutual fund managers and pension funds as it carries much less risk than a closed-ended trust like GBTC. Retail investors may not have been aware of the possibility that GBTC trades below net assets value. Thus the recent event might further pressure investors to move their position to the Canadian ETF.