- European Bitcoin exchange-traded products (ETPs) are experiencing significant outflows this year.
- Despite the rising demand for Bitcoin, European Bitcoin funds have seen over $500 million in net outflows since January.
- According to Morningstar, this trend contrasts with the inflows seen by ETPs for other cryptocurrencies like Ether.
European Bitcoin ETPs face challenges as US-based competitors drive down fees, leading to significant outflows despite rising Bitcoin demand.
Why Are Europe’s Bitcoin ETFs Losing Customers?
During the same period, ETPs for other cryptocurrencies, such as Ether, absorbed $42 million within the region, trending in the opposite direction but doing little to compensate for Bitcoin-related losses. Speaking to the Financial Times, Pierre Debru, head of quantitative research and multi-asset solutions at WisdomTree, said client interest in European crypto ETPs has “greatly increased” since US Bitcoin ETFs went live in January. However, those same ETFs have also brought in unprecedented competition, creating “a new fee environment in Europe” that’s forced European issuers to lower their fees.
Impact of US-Based Competitors
BlackRock and Fidelity, for example – the asset managers behind the 1st and 3rd largest Bitcoin ETFs – now offer 0.25% annual management fees, with even greater temporary discounts for early buyers. In quick response, European Bitcoin ETP providers like Invesco, WisdomTree, and CoinShares all dropped their previous fees from rates above 0.9% to below 0.4%. Similarly, Fidelity’s Advantage Bitcoin ETF (FBTC) in Canada also radically reduced its management fee from 0.95% to 0.39% on January 12, matching its US-based ETF at the time that went live the same day.
Lower Fees, Or Suffer
Funds that failed to lower their management fee haven’t been so fortunate. For example, the Grayscale Bitcoin Trust (GBTC) – which charges a 1.5% fee to investors – has already lost over half of its Bitcoin since the US ETF approvals, and has been eclipsed by BlackRock as the largest Bitcoin ETF despite starting with a 600,000+ BTC lead. Similarly, Canada’s Purpose Bitcoin ETF has lost 20% of its assets during that time after refusing to lower its 1% management fee. Outside the US, Purpose still remains the first and largest Bitcoin spot ETF.
Last week, global Bitcoin spot ETFs surpassed 1 million BTC in total assets under management. VanEck’s CEO in Europe, Martijn Rozemuller, said that the company’s regional crypto ETFs have managed to obtain small inflows, despite the rise in competition.
“Total potential market size considered, European crypto ETPs are still relatively larger than the spot bitcoin ETFs in the US,” he said to FT.
Conclusion
In summary, European Bitcoin ETPs are facing significant challenges due to increased competition from US-based ETFs, which have driven down fees and attracted substantial investor interest. While some European providers have responded by lowering their fees, others have struggled to retain assets. The competitive landscape is likely to continue evolving, with fee structures and investor preferences playing critical roles in determining the success of these financial products.
