The Bitcoin exchange-traded funds started by BlackRock Inc. and Fidelity Investments are gaining a liquidity edge over a larger rival from Grayscale Investments LLC, according to JPMorgan Chase & Co. strategists.
The BlackRock and Fidelity portfolios are among nine new US spot Bitcoin ETFs that began trading on Jan. 11. The more than decade-old Grayscale Bitcoin Trust — the largest fund dedicated to the token — converted into an ETF the same day. The issuers are now vying for a competitive advantage to woo investment.
BlackRock’s iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund scored better on two liquidity studies, the JPMorgan team including Nikolaos Panigirtzoglou said. One analysis used the Hui-Heubel ratio, which purports to measure the number of trades it takes to move prices. The other compared the ETFs’ closing prices with their net asset value.
While these metrics don’t capture all dimensions of market liquidity and depth, “we find evidence that the BlackRock and Fidelity Bitcoin ETFs have already an advantage versus the Grayscale Bitcoin Trust on certain liquidity metrics related to market breadth,” the JPMorgan team wrote in a note.
The Hui-Heubel metric is about four times lower for the BlackRock and Fidelity products, “implying that these two ETFs exhibit significantly more market breadth,” the team said.
Source: JPMorgan Chase & Co.’s Flows & Liquidity research note.
The JPMorgan strategists said the second metric is based on the average absolute deviation of the ETFs’ closing prices from net asset value, with a lower deviation signaling higher liquidity, and vice versa.
This measure’s five-day moving average through Feb. 7 was lower for the BlackRock and Fidelity ETFs, whose readings approached that of the $55 billion SPDR Gold Shares fund, JPMorgan said.
“If we examine dollar volume traded — the most widely used metric for tracking ETF liquidity — it is clear that GBTC has been the liquidity market leader since it launched as a spot Bitcoin ETF,” Louis Hsu, a vice president of ETFs at Grayscale, said in a statement.
GBTC has seen total volume of about $15.6 billion since the ETFs began trading, while the BlackRock and Fidelity funds have had around $7.3 billion and $5.9 billion, respectively, data compiled by Bloomberg show.
The nine new spot Bitcoin ETFs have drawn net inflows of about $8 billion since debuting, while $6 billion has left the Grayscale fund, data compiled by Bloomberg show. The latter remains the biggest with $21 billion in assets, followed by the BlackRock ETF on $3.4 billion and Fidelity’s with $2.9 billion.
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