Fidelity’s FBTC And Bitwise’s BITB Stand Out Among Spot Bitcoin ETFs (BATS:FBTC)

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 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 (BATS:FBTC) have been the three dominant funds in terms of AuM and net flows.

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.

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 (NYSEARCA: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….