BlackRock's ETF Becomes Largest Bitcoin Fund in World

BlackRock's iShares Bitcoin Trust has become the world's largest fund for the world's largest cryptocurrency, racking up nearly $20 billion in total assets

BlackRock Inc's (BLK.N) exchange-traded fund became the world's largest fund for bitcoin on Tuesday, a title that had been held by Grayscale Bitcoin Trust since 2013.

The iShares Bitcoin Trust had $19.68 billion of the token on Tuesday, overtaking Grayscale Bitcoin Trust's $19.65 billion, Bloomberg News reported on Wednesday, citing data it compiled.

Reuters could not independently verify those numbers. Grayscale's product website cites its assets under management as being $19.75 billion. A spokesperson could not be reached for comment.

When the nine new ETFs launched in January, Grayscale's fund had about $29 billion in assets.

The relative flows into BlackRock's ETF and out of the Grayscale Bitcoin Trust have been closely watched by market analysts since U.S. regulators approved the launch of the nine new ETFs and the conversion of Grayscale's publicly traded trust into an exchange-traded product on Jan. 10.

The Securities and Exchange Commission, which is led by crypto skeptic Gary Gensler, had rejected spot bitcoin ETFs for more than a decade over market manipulation worries, but it approved them in January after Grayscale won a court challenge last year.

That proved to be a short-lived victory for Grayscale, which has seen assets steadily flow out of its newly converted ETF since it began trading on Jan. 11.

BlackRock's growing dominance of the ultra-competitive new spot bitcoin landscape "is a reminder that being the first mover doesn't necessarily mean that someone ends up as the biggest winner," said Aniket Ullal, head of ETF data and analytics at CFRA. Early incumbents can have legacy disadvantages, he noted.

From the outset, Grayscale has faced headwinds including selling pressure and a fee of 1.5%, which is notably higher than the average of about 0.25% charged by its new rivals, which also include firms like Fidelity Investments and ARK Investments.

CFRA's Ullal noted, meanwhile, that BlackRock benefits from its strong distribution network among independent financial advisers and wealth managers.

"We're seeing significant assets moving into the ETF from the wealth community as well as from individual advisors," Jay Jacobs, U.S. head of thematic and active ETFs, told Reuters on Tuesday ahead of the Bloomberg report.

"A lot of early movers went from direct ownership of digital assets to IBIT," Jacobs added. "Some of those accounts had millions of dollars invested in the cryptocurrency.

While some hedge funds reported large positions in the new ETFs as of the end of the first quarter, other institutional investors have been slower to embrace the new bitcoin ETFs.

"We know that this is going to be the longest process," said Jacobs of those institutional buyers. "In some cases, it could take years.