BlackRock's Bitcoin ETF Draws $17.2B, Awaits Big Investors

Key Takeaway

• BlackRock predicts a new wave of institutional investors, including sovereign wealth funds and pensions, entering Bitcoin ETFs.
• IBIT ETF by BlackRock has accumulated $17.2 billion in assets, indicating strong interest despite competition with Grayscale's GBTC at $24.3 billion.
• The firm focuses on educating clients about digital assets' potential benefits, highlighting its commitment beyond just leading the spot bitcoin ETF market.

New Wave of Institutional Interest

Despite a recent pause in inflows into spot bitcoin exchange-traded funds (ETFs) after 71 consecutive days of gains, Robert Mitchnick, head of digital assets for BlackRock, the world's largest asset management company, anticipates a resurgence of interest from a different type of investor. Financial institutions such as sovereign wealth funds, pension funds, and endowments are expected to begin trading in the spot ETFs in the coming months. Mitchnick highlighted a renewed discussion around bitcoin, focusing on its integration into portfolio construction. BlackRock has been engaging with various institutional investors for years, aiming to educate them about bitcoin and its potential role in their investment strategies.

ETFs Attracting Diverse Investors

Since their approval in January, spot bitcoin ETFs have seen more than $76 billion in accumulated assets. Among these, BlackRock’s IBIT ETF has been offered on an unsolicited basis by some registered investment advisors (RIAs), with plans to expand offerings to clients of large wealth advisory firms like Morgan Stanley. The competition between IBIT and Grayscale’s GBTC has been a focal point on social media, with IBIT's assets at $17.2 billion and GBTC at about $24.3 billion. A significant portion of IBIT's assets has been attributed to substitutions from Grayscale, alongside inflows from higher-priced international products and bitcoin futures ETFs.

Record Outflows Amid Market Challenges

The U.S. spot bitcoin ETFs experienced their largest daily outflow, with investors withdrawing a net $564 million on a single day, marking a significant downturn since their debut. This outflow coincides with a challenging period for risky assets, including cryptocurrencies, as the prospect of higher-for-longer interest rates impacts the market. Despite this setback, Caroline Bowler, CEO of BTC Markets Pty, views the overall demand for ETFs across different geographies as healthy. The outflows have led to record discounts to net asset value for some U.S. portfolios, highlighting the volatility challenges within the bitcoin market.

Street Views

• Robert Mitchnick, BlackRock (Bullish on spot bitcoin ETFs and digital assets):

  "The current lull is likely to be followed by a new wave from a different type of investor... The coming months could see financial institutions such as sovereign wealth funds, pension funds and endowments start to trade in the spot ETFs." "Many of these interested firms – whether we're talking about pensions, endowments, sovereign wealth funds, insurers, other asset managers, family offices – are having ongoing diligence and research conversations, and we're playing a role from an education perspective." "When we think about this space, we see the potential for digital assets to benefit our clients and capital markets, with a focus in three areas: cryptoassets, stablecoins and tokenization. And these pillars, they're all interrelated. That's a really important thing for people to understand. And the work that we do across each informs our strategy and our insights for the others."