BlackRock Bitcoin ETF Outearns S&P 500 ETF With 0.25% Fee

BlackRock, the world's largest asset manager, has seen a significant shift in its ETF revenue streams, with its Bitcoin ETF now generating more annual fees than its S&P 500 ETF. This unexpected development highlights the growing demand for Bitcoin exposure among investors.

The iShares Bitcoin Trust ETF (IBIT), launched in January 2024, has amassed $75 billion in assets and is generating $187.2 million in annual fee revenue. In comparison, the iShares Core S&P 500 ETF (IVV), with $624 billion in assets, earns $187.1 million annually. The higher fee revenue for IBIT is primarily due to its 0.25% expense ratio, which is eight times higher than IVV's 0.03% expense ratio. Despite its smaller size, IBIT has attracted steady inflows for 17 out of the last 18 months, driven by both retail and institutional investors.

Since its launch, IBIT has captured more than 55% of the total market for spot Bitcoin ETFs, with $52 billion out of the $54 billion in total inflows. This dominance is a testament to investors' preference for easy access to Bitcoin without the need for new platforms. Paul Hickey, co-founder of Bespoke Investment Group, noted that this trend indicates a strong demand for Bitcoin as a store of value and a portfolio diversifier.

Nate Geraci, president at NovaDius Wealth Management, attributed the shift in revenue to two factors: the growing demand for Bitcoin and the shrinking fees for stock ETFs. He pointed out that investors are willing to pay higher fees for exposures they view as truly additive to their portfolios. This trend could potentially help BlackRock surpass State Street in overall ETF trading, as BlackRock currently handles 25% of ETF trading by dollar volume, while State Street leads with 31%.

Bitcoin's rise has also been supported by Wall Street, with prominent figures like Michael Saylor's Strategy investing billions in the coin. Hedge funds have also been involved in trades linked to Strategy, using strategies that involve shorting the stock while holding the bonds. Despite the influx of money, Bitcoin's price has remained relatively stable in recent months, trading within a range of $93,000 to $111,000. This low volatility is a significant change from the wild price swings of past years and reflects a shift in how Bitcoin is viewed by investors.

Michael Longoria, a research analyst, noted that Bitcoin is becoming less speculative and more akin to a volatile macro asset. With lower volatility, traders are seeing fewer opportunities for big moves and have shifted to strategies like writing call options on Bitcoin they already own. This strategy provides some income while limiting price movements. David Lawant, head of research at FalconX, observed that this kind of trading is now common, with more investors focused on controlling risk and earning steady returns.

The calmer market is also reflected in transaction data, with fewer trades but each carrying more value. High-net-worth players are holding large positions, while individual traders are stepping back. This shift in market dynamics underscores the growing institutional interest in Bitcoin and its role as a store of value in investment portfolios.