EBIT's Decline and the Future of Canadian Bitcoin ETFs: A Market Shift or Temporary Correction?

The Evolve Bitcoin ETF (EBIT) has experienced a notable decline in performance in 2025, raising questions about whether this underperformance signals a broader structural shift in the cryptocurrency ETF landscape or a temporary correction amid market volatility. As Canadian investors grapple with the evolving dynamics of Bitcoin exposure, the interplay of regulatory, macroeconomic, and competitive pressures is reshaping the sector. This analysis examines EBIT's challenges, its position relative to competitors like the Purpose Bitcoin ETF (BTCC), and the implications for the future of Bitcoin ETFs in Canada.

EBIT's Underperformance: Structural or Cyclical?

EBIT's year-to-date return of 4.28% as of December 2025 contrasts sharply with Bitcoin's price surge to $91,000–$93,000 and the S&P 500's 17.8% total return for the year. While Bitcoin's outperformance in a crypto-friendly macro environment underscores its role as a high-volatility, high-reward asset, EBIT's -7.38% YTD performance highlights a disconnect between the ETF and its underlying asset. Technical analysis further complicates the picture: a "strong sell" signal based on moving averages coexists with neutral oscillator readings, suggesting short-term uncertainty.

This underperformance may reflect a structural shift in ETF dynamics. By 2025, Bitcoin ETFs have increasingly acted as stabilizing forces rather than amplifiers of price swings, absorbing sell orders during pullbacks and reducing their impact on broader markets. This role contrasts with earlier periods when ETF inflows drove speculative momentum. Additionally, capital rotation, fee migration, and volatility-driven rebalancing have dampened inflows to EBIT and similar products. For instance, EBIT's 0.75% management fee, while competitive, lags behind Fidelity's Advantage Bitcoin ETF (FBTC), which charges 0.32% and has attracted CAD $1.257 billion in assets under management.

Regulatory and Competitive Pressures

The Canadian regulatory environment for Bitcoin ETFs has matured in 2025, with the Canadian Securities Administrators enforcing stricter custody and risk management standards. While this clarity has bolstered institutional confidence, it has also intensified competition. Purpose's BTCC, the first Bitcoin ETF in Canada, maintains a dominant position with CAD $993.5 million in AUM and a 1.5% fee, leveraging its pioneering status and liquidity advantages. Evolve's strategy, by contrast, emphasizes Bitcoin as a long-term store of value amid inflationary pressures, but its market share has been eroded by lower-cost alternatives and shifting investor preferences.

The 2025 IRS/Treasury ruling further leveled the playing field by allowing both ETFs and Digital Asset Trusts (DATs) to earn staking rewards without compromising tax efficiency. This development has intensified competition, as DATs remain popular among long-term holders seeking simplified tax reporting. Meanwhile, direct Bitcoin ownership continues to outperform ETFs by 5.7% annually, driven by the absence of management fees and 24/7 trading capabilities. However, ETFs retain advantages in liquidity and risk-adjusted returns, making them a balanced option for risk-averse investors.

Macroeconomic and Market Dynamics

Bitcoin's supply-demand fundamentals-particularly its capped supply and decentralized nature-have reinforced its appeal as a safe-haven asset, even as its volatility persists. The S&P 500's 15% underperformance against Bitcoin in 2025 (measured in BTC terms) underscores this trend. However, EBIT's struggles reflect broader macroeconomic headwinds, including global trade tensions and inflationary pressures, which have dampened risk-on sentiment and driven rebalancing of crypto portfolios.

Institutional adoption has also introduced new dynamics. The launch of spot Bitcoin ETFs in 2024 legitimized Bitcoin as an investable asset, with U.S. ETFs collectively holding over 1.26 million BTC by mid-2025. Canadian firms like Strategy have further validated Bitcoin's role by purchasing 4,020 BTC, signaling growing corporate confidence. However, this adoption has not translated into sustained inflows for EBIT, which faces a 1-year return of -15.06% as of November 2025.

The Future of Canadian Bitcoin ETFs

The future of Bitcoin ETFs in Canada hinges on three key factors: regulatory clarity, institutional adoption, and fee competitiveness. The CSA's oversight has already enhanced market trust, while the IRS ruling has expanded yield-generation opportunities. However, the sector must address structural challenges, including the performance gap between direct Bitcoin ownership and ETFs.

For Evolve, the path forward requires innovation. While its focus on Bitcoin as a store of value aligns with macroeconomic trends, the firm must contend with aggressive pricing from competitors like Fidelity and Purpose. Similarly, BTCC's liquidity advantages and brand recognition provide a buffer against fee-driven competition, but its higher 1.5% fee may deter cost-sensitive investors.

Conclusion: Temporary Correction or Structural Shift?

EBIT's underperformance appears to reflect a combination of temporary corrections and structural shifts. Short-term volatility and capital rotation have undoubtedly impacted its returns, but the broader trend of ETFs acting as stabilizing forces rather than speculative amplifiers suggests a deeper transformation in the sector. Regulatory advancements and institutional adoption are likely to drive long-term growth, but firms must adapt to fee pressures and evolving investor preferences.

For Canadian investors, the choice between EBIT, BTCC, and direct Bitcoin ownership will depend on risk tolerance, cost sensitivity, and strategic objectives. While direct ownership offers superior returns in bullish cycles, ETFs provide a regulated, diversified alternative. As the sector matures, the ability to balance innovation with cost efficiency will determine which players thrive in the evolving Bitcoin ETF landscape.