North America’s first Bitcoin ETF launched in Canada last month, and already holds nearly 11,300 BTC.
Canadian asset manager Purpose Invest reports that, as of March 4, its Bitcoin ETF has $722 million CAD in assets under management, equivalent to about $571 million USD. The Ontario Securities Commission approved the firm’s product on Feb. 12, which means that the fund averaged about $28.55 million in inflows per day. According to the company’s website:
We saw tremendous demand at various points in the first 5 trading days. […] We took in more than half a billion dollars in the first few trading days.
The Purpose Bitcoin ETF in its forex-hedged and non-forex hedged versions trade at a nearly 29% premium compared to the value of the underlying bitcoin. The USD version of the product, on the other hand, trades at only a 2% premium.
This situation stands in contrast to the world’s top tradable Bitcoin fund, the Grayscale Bitcoin Trust (GBTC).
GBTC currently trades at just over $46 per share, while every share corresponds to $47 worth of underlying bitcoin. That being said, it is rare to see GBTC trade at a discount to its actual bitcoin stake. Furthermore, Grayscale charges investors a yearly management fee of 2%, while the Purpose Bitcoin ETF charges 1%. According to Purpose Investments, ETFs have some features that make them superior to closed-end funds such as GBTC:
An ETF provides a more pure exposure to Bitcoin and the structure better reflects what investors are looking for – to track the price of Bitcoin. Unlike ETFs, closed-end funds cannot quickly add or remove units to maintain consistent exposure. […] An ETF has a robust creation and redemption process that allows exposure to expand and contract as necessary to accommodate demand.
Purpose Investments explains on its website that investing in a fund like GBTC when it is trading at a premium can cause losses when fluctuations in demand decrease the premium or even turn it into a discount. An ETF can more closely track demand fluctuations due to its creation and redemption process.
So far, Canada is the only country in North America to have approved the launch of a Bitcoin ETF. Still, many experts believe that with the departure of former Securities and Exchange Commission (SEC) chairman Jay Clayton — who starkly opposed such products — investors will soon see a Bitcoin ETF launch on U.S. exchanges.
That is true especially since Clayton’s position is now held by Gary Gensler, who taught a course on cryptocurrencies and blockchain at the Massachusetts Institute of Technology before joining the regulatory agency. What’s more, Goldman Sachs — one of the United States’ top investment banks — is reportedly considering its own Bitcoin ETF after restarting its bitcoin futures trading desk.