BlackRock Bitcoin ETF Outearns S&P 500 Fund by $100,000

BlackRock, the world’s largest asset manager, has seen a significant shift in its earnings, with its spot Bitcoin exchange-traded fund (ETF) generating more annual fees than its flagship S&P 500 fund. This development highlights the surging investor demand for Bitcoin and the significant fee compression in core equity exposure.

The iShares Bitcoin (BTC) ETF (IBIT), with an expense ratio of 0.25% and around $75 billion in assets under management (AUM), has generated $187.2 million in annual fees. This amount is approximately $100,000 more than its iShares Core S&P 500 ETF (IVV), which has approximately $624 billion in assets but charges almost nine times less, at just 0.03%.

Several crypto executives have commented on the findings, noting the growing interest and commitment from institutions towards Bitcoin. Crypto entrepreneur Anthony Pompliano stated that Bitcoin has captured Wall Street’s “undivided attention.” Strive Funds chief financial officer Ben Pham suggested that Bitcoin could be “the death” of active management and passive indexation portfolios. Crypto trader Cade O’Neill emphasized that institutions are no longer just curious about Bitcoin but are committed to it.

Since its January 2024 launch, BlackRock’s IBIT has recorded $52.4 billion in inflows, the highest of any US spot Bitcoin ETF. This influx of capital underscores the strong demand for Bitcoin among investors, both institutional and retail. The IBIT has experienced inflows for 17 out of the past 18 months, with only February seeing an outflow. This dominance is further evidenced by IBIT's ranking among the top 20 ETFs by trading volume in the U.S.

The IVV, despite being surpassed by IBIT, is a storied product with a 25-year history and ranks third in scale among over 4,300 ETF products in the U.S. Its position as a benchmark for the S&P 500 Index highlights the significance of IBIT's achievement. The shift in revenue leadership indicates that investors are willing to pay higher fees for products they believe will enhance their portfolio value, despite intense pricing competition among spot Bitcoin ETFs.

The demand for Bitcoin exposure has been suppressed for some time, as investors seek to include it in their portfolios without the need for additional accounts. Bitcoin's value storage properties have left other tokens far behind, solidifying its leadership position in the cryptocurrency market. As Bitcoin breaches the $100,000 mark, its dominance is further cemented, with the buying spree on Wall Street 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%. This development reflects the growing acceptance of Bitcoin as a legitimate investment asset and the increasing demand for cryptocurrency exposure among investors.