IBIT liquidity and custody dominance in the Bitcoin ETF market

IBIT liquidity and custody differences

BlackRock’s iShares Bitcoin Trust (IBIT) holds $62.70B in assets and 811,817 BTC. This volume creates a liquidity lead over Fidelity’s Wise Origin Bitcoin Fund (FBTC), which holds $14.03B and 176,513 BTC. IBIT saw $2.47B in trading volume in the latest session, while FBTC saw $376.46M. Both funds charge a 0.25% annual sponsor fee. While IBIT uses Coinbase Custody Trust, Fidelity manages FBTC through its affiliate Fidelity Digital Asset Services. Because IBIT attracts more two-way order flow, it narrows spreads and attracts institutions that prioritize execution costs, creating a feedback loop that maintains its lead over FBTC, which currently holds $14.03B in assets. IBIT accounts for 63.7% of all US spot-ETF BTC, while FBTC accounts for 13.8%. IBIT netted more than $37 billion in inflows since launch, while FBTC attracted nearly $12 billion. The market contains 12 approved funds, with IBIT and GBTC alone accounting for two-thirds of all spot bitcoin ETF assets. IBIT trades on the Nasdaq, while FBTC trades on the Cboe BZX.

Cohen and the European expansion

Samara Cohen, BlackRock’s Chief Investment Officer of ETF and Index Investments, manages over $6.6 trillion in assets and oversees a platform for 100 million people. She argues that the distinction between tokens and equity will blur in five years. Her strategy focuses on tokenization and investor-centric design to facilitate the move of assets onto public blockchains. In the first week of the January 2024 launch, spot ETFs comprised 15% of Bitcoin trading volume, but this leveled to 9-10% as the ecosystem adapted. Fidelity International recently listed a physical Bitcoin-backed ETP on the London Stock Exchange and Deutsche Borse Xetra for professional investors. This move follows the UK’s Financial Conduct Authority decision to authorize such products in late May. A Fidelity Digital Assets survey indicates 70% of institutional investors expect to buy digital assets, and 90% expect to have an allocation within five years. You should understand that these European ETPs follow different regulatory structures than US spot Bitcoin ETFs. Will the US adopt similar regulatory frameworks for retail investors?

Fee compression and market reality

Grayscale’s converted trust (GBTC) charges a 1.5% fee. This high cost drives persistent outflows from GBTC when compared to the 0.25% fees at IBIT and FBTC. IBIT net asset value is $45.30 per share, while FBTC is $69.43 per share. Despite IBIT losing $104 million from a Morgan Stanley position, the fund maintains a market cap of over $73 billion. Bitcoin’s price fell 36% through November 22 after hitting $126,270 on October 6. Bitcoin’s implied volatility rose to 60, and its correlation with gold shifted to a negative 0.66. Bitcoin grew 129% in 2024, and the price reached $96,000 as of November 21. Total Bitcoin ETF inflows reached $1.7 billion recently, and the 12 approved funds hold a significant share of the market. IBIT is the clear leader for liquidity. Monitor the $100,000 price level for further volatility.