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News/BlackRock, Morgan Stanley, and Beyond: The Race Heats Up for Bitcoin ETFs

BlackRock, Morgan Stanley, and Beyond: The Race Heats Up for Bitcoin ETFs

Van Thanh Le

Mar 1 2024

last month3 minutes read
Chibi robot holding Bitcoin ETF

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US Spot Bitcoin ETFs See Strong Inflows Despite Grayscale Outflow

Despite a significant outflow from Grayscale’s Bitcoin ETF, net inflows for US spot Bitcoin ETFs remained positive, dropping from a record $673 million to $92 million. Grayscale saw a $598 million outflow, its second-highest single-day total since becoming an ETF, while BlackRock’s iShares Bitcoin Trust (IBIT) continued strong inflows, compensating for Grayscale's losses. Other funds like Fidelity’s Bitcoin ETF saw moderate inflows. 

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Source: Farside

Overall, the 10 US Bitcoin ETFs experienced significant net inflows of about $7.5 billion over seven weeks, despite Grayscale’s outflows. Bitcoin ETF trade volumes slightly decreased but remained high at $4.7 billion, indicating sustained investor interest. BlackRock, Grayscale, and Fidelity’s Bitcoin funds each saw over $1 billion in trade volumes. 

In a broader context, nearly $40 billion flowed into the top 10 ETFs in February, highlighting diversified investor interest in equities, bonds, and Bitcoin, with significant inflows into tech and S&P 500 ETFs, alongside notable interest in Bitcoin through the iShares Bitcoin Trust (IBIT).

Wells Fargo, Merrill Join Bitcoin ETF Fray for Wealth Management Clients

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Wells Fargo and Bank of America's Merrill have started offering bitcoin ETFs to select wealth management clients. Fidelity and Charles Schwab also provide access to these ETFs since Jan. 11. Vanguard opposes cryptocurrency investments due to their perceived lack of intrinsic value and high volatility. 

Meanwhile, industry experts predict widespread availability of bitcoin ETFs through registered investment advisers and brokerage firms, with large wirehouses expected to lag behind. Record-breaking trade volumes and inflows in Bitcoin ETFs reflect increasing investor demand. 

Firms are accelerating their efforts to meet this demand despite concerns from some institutions about integrating these products. High demand and rising prices are driving firms to make these investments available to clients promptly to avoid dissatisfaction among advisors and customers. 

Morgan Stanley Considers Spot Bitcoin ETFs for Brokerage Platform

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Morgan Stanley is reportedly considering offering spot Bitcoin exchange-traded funds (ETFs) on its brokerage platform. The move is part of a broader trend in the financial industry, with both large registered investment advisor (RIA) networks and broker-dealer platforms evaluating the introduction of these products following the approval of spot Bitcoin ETFs in the U.S. in January. This development is expected to attract significant investment into the emerging asset class. 

Currently, there are 10 spot Bitcoin ETFs trading in the U.S., with notable options including Grayscale's GBTC, BlackRock's IBIT, and Fidelity's FBTC. While it's unclear which specific ETFs Morgan Stanley is considering, the institution has a history of crypto involvement, having provided access to Bitcoin funds for its wealth management clients since 2021. The bank's former CFO indicated a willingness to work with regulators to expand its crypto-related services in response to increasing interest in these investment options.  

BlackRock Brazil Launches Bitcoin ETF Replica Fund

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BlackRock Brazil, in partnership with B3, is set to launch the iShares Bitcoin Trust ETF BDR (IBIT39) on March 1, mirroring the U.S. BTC ETF's performance. Investors will have access to Bitcoin through a security — the ETF BDR. The Brazilian ETF will have an administrative fee of 0.25% and an exemption on the first $5 billion of assets under management. 

Investors with at least 1 million reals in the market will have access, pending approval of retail sales. The Brazilian market already hosts 13 crypto-exposed ETFs with a combined value of 2.5 billion reals. The U.S. SEC-approved BlackRock BTC ETF rapidly reached $2 billion in assets under management, followed by an increase to over $8 billion. There are also considerations for a potential spot Ether ETF in Brazil, pending SEC approval in the U.S.  

Kraken Unveils Institutional Services to Target Bitcoin ETF Space

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Kraken recently launched its Institutional Services Division to compete in the Bitcoin ETF market. Tim Ogilvie leads the division after the acquisition of Staked in 2021. The division caters to asset managers, hedge funds, and high net-worth individuals by offering spot and OTC trading, staking services, and plans for qualified custody. Kraken aims to rival Coinbase and Binance in institutional offerings. 

The exchange faced an SEC lawsuit but moved to dismiss it. Meanwhile, spot Bitcoin ETFs are gaining traction among institutional investors, with billions flowing into funds led by BlackRock and Fidelity. The recent surge in Bitcoin ETF trading indicated growing investor interest despite net outflows from Gold ETFs, possibly reflecting a shift towards U.S. equities.  

Outgoing Vanguard CEO Exits Without Embracing Bitcoin ETFs

Vanguard CEO Tim Buckley, known for shunning spot Bitcoin ETFs, is set to retire, prompting speculation about a potential pivot on cryptocurrencies by the firm's new leadership. While competing U.S. financial institutions have embraced Bitcoin ETFs, Vanguard's ETF VOO, which tracks the S&P 500 Index, has outperformed in attracting $15.7 billion in new investments this year, twice the net inflow of BlackRock's Bitcoin ETF, IBIT. 

Bloomberg analyst James Seyffart emphasizes that Vanguard remains robust despite its Bitcoin stance. The company's decision on cryptocurrency under new leadership remains uncertain amidst its successful ETF performance.  

Conclusion

Despite Grayscale's outflows, US spot Bitcoin ETFs saw strong inflows, exceeding $7.5 billion in seven weeks. Major institutions like Morgan Stanley and BlackRock are entering the Bitcoin ETF space, catering to growing investor demand. This trend signifies a potential shift in the financial industry's stance on cryptocurrencies, but competition and regulatory considerations remain key factors to watch.

FAQs

1. What are Bitcoin ETFs and why are they popular?

Bitcoin ETFs are investment vehicles allowing indirect investment in Bitcoin without directly holding it. They offer regulated exposure to Bitcoin, attracting investors seeking diversification and potential for high returns.

2. Why did Grayscale see outflows while other Bitcoin ETFs gained inflows?

Grayscale's Bitcoin ETF is a trust structure facing conversion challenges, leading to outflows. Meanwhile, other spot Bitcoin ETFs offer more direct exposure, attracting investors despite higher fees.

3. How is BlackRock Brazil launching a Bitcoin ETF replica fund?

BlackRock Brazil's ETF mirrors the US BlackRock Bitcoin ETF's performance, providing Brazilians access to Bitcoin through a local security with a 0.25% fee. This caters to the growing interest in Bitcoin within the Brazilian market.

4. What is the significance of Kraken launching its Institutional Services Division?

Kraken aims to compete with established players like Coinbase and Binance by offering spot and OTC trading, staking services, and qualified custody to institutional investors entering the Bitcoin ETF market. This reflects the increasing institutional interest in Bitcoin ETFs.

This article has been refined and enhanced by ChatGPT. 

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