The world’s first bitcoin exchange traded fund is off to a hot start. The Purpose Investments bitcoin ETF now has more than $590 million in assets under management after launching just one week ago.
The ETF was the first physically settled Bitcoin ETF to win approval and began trading in Canada on Thursday. It now gives investors a more direct way to invest in bitcoin relative to other closed-end funds like the popular Grayscale Bitcoin Trust (GBTC) and a less direct way than outright owning bitcoin through an individual wallet.
Purpose Investments Chief Investment Officer Greg Taylor told Yahoo Finance that the inflows are proof of pent-up demand among investors looking for a more familiar way to gain exposure to cryptocurrencies.
“A lot of people have wanted to get exposure to bitcoin but they haven’t really wanted to go through the hoops of opening up their own accounts or their own wallet to do so or trading some of the other closed-end funds,” he said. “Having the ETF option I think has always been the holy grail out there and we’re happy to have it trading and we’re seeing some of the results of that pent-up demand.”
The Purpose Bitcoin ETF (BTTC) carries a management fee of 1%. Its competitor and second ETF to gain approval, the Evolve bitcoin ETF (EBIT) cut its management fee to 0.75% on Wednesday. Both differ from closed-end trusts in that they directly purchase bitcoin and hold it in cold storage without the risk of trading at large premiums to the value of the ETF’s underlying bitcoin holdings. From an ease-of-use perspective, that allows investors to gain more direct exposure without worrying about buying and selling crypto directly through a wallet on an exchange like Coinbase. That’s particularly important for institutional funds that might not be able to go that route.
According to Taylor, the Purpose Bitcoin ETF has seen inflows from around the world on the retail and institutional side.
“It’s hard with an ETF to figure out exactly where the inflows are coming from, but we’ve had a lot of people reach out from around the world that want to get access to this product,” he said. “We are surprised to see a fair bit of demand from the institutions that are looking again for an efficient way to get exposure to bitcoin and don’t have means to do that in other areas.”
A similar surge in institutional interest in cryptocurrencies was also revealed in Coinbase’s Thursday filing with the Securities and Exchange Commission to go public via a Nasdaq direct listing. Coinbase revealed its institutional trading volumes nearly tripled from 2019 to 2020 to reach $119 billion. Crypto advocates point to that institutional exuberance and purchases from publicly traded companies like Square and Tesla as proof that this bitcoin rally is not like the boom and bust that occurred in 2017 and 2018 when he crypto fell nearly 85% from a peak of $20,000.
Coinbase’s initial filing revealed institutional trading volume totaled just $28 billion in 2018.
Regulators in the U.S. have yet to approve a bitcoin ETF, though investor and Galaxy Digital founder Mike Novogratz told Yahoo Finance that it is likely to happen within the year, given Canada’s approvals and the inefficient premiums observed in bitcoin trusts.
Zack Guzman is an anchor for Yahoo Finance Live as well as a senior writer covering entrepreneurship, cannabis, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.
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