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

BlackRock, the world’s largest asset manager, has seen a notable shift in its earnings, with its spot Bitcoin exchange-traded fund (ETF) now generating more annual fees than its flagship S&P 500 fund. This development underscores 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 a much lower fee of 0.03%.

Several industry experts have commented on this shift. Crypto entrepreneur Anthony Pompliano noted that Bitcoin has captured Wall Street’s full attention. Strive Funds chief financial officer Ben Pham suggested that Bitcoin could be the end of active management and passive indexation portfolios. Crypto trader Cade O’Neill highlighted that institutions are no longer just curious about Bitcoin but are committed to it. McKay Research founder James McKay described the news as bullish and significant.

Since its launch in January 2024, BlackRock’s IBIT has recorded $52.4 billion in inflows, the highest of any US spot Bitcoin ETF. This influx of capital into Bitcoin ETFs reflects a broader trend of institutional investment in cryptocurrencies, driven by the belief in Bitcoin's potential to enhance portfolio value.

The IBIT’s success is also a testament to the growing acceptance of Bitcoin as a legitimate investment asset. Despite the 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. This trend suggests sustained growth in the crypto ETF market and a potential new wave of crypto ETFs.

The IVV, with a 25-year history, is one of the largest 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 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%.