Blackrock Bitcoin ETF Outearns S&P 500 Fund With 0.25% Fee

Blackrock’s Bitcoin ETF has surpassed its flagship S&P 500 fund in fee revenue, marking a significant shift in institutional investment trends. The iShares Bitcoin Trust ETF (IBIT) has generated more revenue than the iShares Core S&P 500 ETF (IVV), despite having nearly nine times fewer assets under management. IBIT’s 0.25% expense ratio translates to approximately $187.2 million in annual revenue, slightly edging out IVV’s $187.1 million generated by its 0.03% fee.

Since its debut in January 2024, IBIT has amassed around $75 billion in assets, capturing over 55% of the total market share in bitcoin ETFs. This surge in demand is driven by increased regulatory clarity, which has paved the way for institutional participation from hedge funds, pension funds, and banks. The approval of spot bitcoin ETFs by U.S. regulators has unlocked significant demand, positioning IBIT among the top 20 ETFs by trading volume.

Nate Geraci, president of Novadius Wealth Management, highlighted that IBIT’s success reflects both the surging investor demand for Bitcoin and the significant fee compression in core equity exposure. Paul Hickey, co-founder of Bespoke Investment Group, noted that Bitcoin’s role as a store of value has positioned it as a leader in the cryptocurrency market, outpacing other digital assets. He emphasized that IBIT’s performance indicates the pent-up demand for Bitcoin exposure within traditional portfolios.

Larry Fink, CEO of Blackrock, has expressed strong support for Bitcoin, viewing it as a “digital gold” and a viable hedge against inflation and currency debasement. Fink believes that if sovereign wealth funds allocate just 2%-5% of their portfolios to Bitcoin, its price could rise to unprecedented levels, potentially reaching $500,000 to $700,000 per Bitcoin. He anticipates that increased transparency and liquidity will accelerate Bitcoin’s acceptance as a mainstream asset class.

The higher expense ratio of IBIT, which is due to the costs associated with storing and securing Bitcoin, as well as regulatory and compliance costs, has contributed to its higher fee revenue. The significant increase in Bitcoin’s price, which has surged by over 300% in the past year, has also boosted IBIT’s assets under management, leading to higher fee revenue.

However, the sustainability of IBIT’s fee revenue remains a question. The higher expense ratio may make it less attractive to cost-conscious investors, who might prefer lower-cost alternatives. Additionally, the volatility of Bitcoin’s price could lead to fluctuations in IBIT’s assets under management, impacting its fee revenue. Despite these challenges, the growing demand for Bitcoin and other cryptocurrencies suggests that the Bitcoin ETF market will continue to evolve, with potential for further competition as other asset managers seek to capitalize on this trend.