BlackRock's Bitcoin ETF Outearns S&P 500 Fund by 0.01%

BlackRock, the world's largest asset management company, has seen its Bitcoin exchange-traded fund (ETF) generate more revenue than its flagship product, the S&P 500 Index ETF. The iShares Bitcoin Trust ETF (IBIT), with an approximate size of 750 billion dollars, has been popular among both institutional and retail investors, experiencing fund inflows for 17 out of the past 18 months, with only February of this year seeing an outflow.

The fund has a fee rate of 0.25%, which, when roughly estimated, generates approximately 187.2 million dollars in fee income annually. This figure is slightly higher than the 187.1 million dollars in income generated by BlackRock's iShares Core S&P 500 ETF (IVV). Despite IVV having an asset size of 6240 billion dollars, nearly nine times that of IBIT, its fee rate is only 0.03%.

This shift in revenue leadership highlights the strong demand for Bitcoin among investors and the significant compression in stock ETF fees. Despite intense pricing competition among spot Bitcoin ETFs, IBIT has demonstrated that investors are willing to pay higher fees for products they believe will genuinely enhance their portfolio value.

Since the approval of spot Bitcoin ETFs for trading in January 2024, IBIT has attracted 520 billion dollars of the 540 billion dollars in net inflows, commanding over 55% of the Bitcoin ETF market and establishing itself as the dominant player in the sector. Following the reluctant approval of Bitcoin ETFs by U.S. regulators, the market has seen a surge of capital from hedge funds, pension funds, and banks. IBIT's fee rate is comparable to similar products, yet it still ranks among the top 20 ETFs by trading volume in the U.S.

It is worth noting that IVV, which has been surpassed by IBIT, is no ordinary product. With a 25-year history, IVV ranks third in terms of scale among the over 4300 ETF products in the U.S., trailing only the Vanguard and State Street Global Advisors S&P 500 funds.

This development indicates that the demand for Bitcoin exposure among investors has been suppressed for some time, as they seek to include it in their portfolios without the need for additional accounts. It also reflects Bitcoin's leadership position in the cryptocurrency market, where its value storage properties have left other tokens far behind.

As Bitcoin breaches the 100,000 dollar mark, its leading position in the cryptocurrency market is further solidified. The buying spree on Wall Street is primarily led by Strategy, a company that continues to use cash to increase its holdings of Bitcoin.

Analysts suggest that the dual driving force of IVV and IBIT could help BlackRock surpass State Street, becoming the new liquidity leader in the ETF market. Based on trading volume, BlackRock holds approximately 25% of the market share, second only to State Street's 31%.