Summary Bitwise Bitcoin ETF stands out for its low fees, strong tracking performance, and growing AuM, making it a top choice for Bitcoin exposure. Bitcoin's resilience and quick recovery from market dips highlight its potential as a rewarding investment in various market conditions. Despite inherent risks, spot Bitcoin ETFs like BITB offer safer exposure compared to direct Bitcoin ownership, mitigating custody and theft concerns. Bitwise's expansion into other crypto ETPs and the European market will likely boost its AuM and maintain low fees, enhancing its market position. Following the approval of the spot Bitcoin ( BTC-USD ) ETFs in January, I considered the Bitwise Bitcoin ETF ( BITB ), as one of the top picks among the spot Bitcoin ETFs because it has one of the lowest fees and the first six months fee waiver was also an attraction for the ETF. Bitwise’s experience in creating and managing crypto funds was also appealing. To top it all off, Bitwise was the first fund to publish the on-chain wallet addresses , showcasing a commitment to transparency that aligns perfectly with the tenets of blockchain technology. Bitwise is becoming a crypto ETFs frontrunner and has just become the first fund to file for a spot XRP ETF ( XRP-USD). ETF Central (BITB vs IBIT tracking performance) BITB has expanded since launch and now commands $2.36 billion in AuM and sits in mid-tier range among the spot Bitcoin ETF funds. The largest spot Bitcoin ETF fund, Blackrock’s iShares Bitcoin Trust ETF ( IBIT ), is about 10x bigger at $22.51 billion. BITB has been a reliable mid-sized fund and has shown a strong tracking performance. Compared to IBIT with a -0.20 bps tracking difference, BITB shows a -0.14 bps tracking difference. As a mid-tier fund, there is potentially a balance between liquidity and efficient trade execution for BITB. By efficient trade execution, I mean BITB’s ability to buy and sell Bitcoin in response to inflows and outflows with minimal market impact, reducing price slippage and keeping transaction costs low. Like the other spot ETFs, BITB performance is directly tied to how Bitcoin performs; hence, a close look at Bitcoin’s price trend and overall market behavior gives valuable insights into the broader outlook of BITB (and the other spot Bitcoin ETFs). Bitcoin Resilience is at an All-Time High Bitcoin is perceived (especially by Bitcoin maxis ) to be mostly uncorrelated to the general financial market; however, the reality is that every asset is influenced by broader macroeconomic forces, and Bitcoin is no exception. Investors who were active in crypto during the last market cycle (in 2020) would remember the COVID black swan that sent Bitcoin crashing by over 60% in just a week, from $10,500 to $3,800. BTC would go on to surge by ~1,700% from its COVID-era low to hit a ~$69,000 high in 2021. The Block The preceding chart shows the daily net flows of the spot Bitcoin ETFs since launch to date. And as we can see, there have been days with recorded steep negative net flows. Heavy outflows were recorded on May 1, this year, as the ETF funds saw $-563.7 million in outflows and net flows, breaking the outflow record as of that date. The negative sentiment was directly linked to the Fed's rate cut decision , as many investors had speculated a rate hike. The Fed decided to hold the rate steady between 5.25% and 5.5% and a rate hike in the near future was ruled out. Following this announcement , net flows became positive again, and the spot ETFs witnessed a total of $378.3 million in net flows. One characteristic that Bitcoin has exhibited since it became a well-known asset is its growing resilience. This same resilience has been shown in the inflows recorded by the spot Bitcoin ETFs since they launched. Demand for the spot Bitcoin ETFs has, in fact, added to Bitcoin's resilience and the price rebound we've seen in the events of the August carry trade FUD, the German government Bitcoin sell-off FUD in July, during the fears of Mt. Gox reimbursement estate sell-off, and after the recent dips caused by the middle-East conflict which ricocheted throughout the traditional and crypto markets. And Bitcoin’s swift rebound makes it two steps away from being the decoupled and safe-haven asset that it is perceived to be. The point of highlighting Bitcoin’s recent dips and comebacks in this article is to illustrate Bitcoin’s market resilience to investors and to point out why gaining crypto exposure could be a wise move at this stage of the crypto market cycle and amidst the current geopolitical tensions and broader macro outlook. Bitcoin and its derivative products and investment vehicles are beginning to offer a win-win for investors. Because on the one hand, its proven ability to recover quickly from downturns and surpass previous highs provides a level of resilience that benefits investors in unfavorable market conditions, and on the other hand, Bitcoin also performs exceptionally well in a favorable macro environment. A good example of this is Bitcoin’s recent surge following the Fed’s 50 bps rate cut last month. These dual strengths make Bitcoin a potentially rewarding investment in different market conditions. In the short run, the market is a voting machine but in the long run, it is a weighing machine - Benjamin Graham Short-term volatility could be disconcerting for traditional investors, I, however, remain bullish on Bitcoin and the spot ETFs performance in the medium to long-term. I believe that the catalyst that the Bitcoin post-halving supply cut brings is still much in play, as we've seen Bitcoin rebounding above the $60,000 support on major dips since the halving. Risks Bitcoin exposure comes with certain risks, and one of the wells talked-about risks is the volatility the asset and its investment vehicles exhibit. Also, the risk of asset loss or theft is notably higher in crypto and its related products compared to traditional investments. This risk has, however, been mitigated through gaining exposure through a spot Bitcoin ETF like BITB compared to directly owning Bitcoin and self-custody, as Bitwise takes care of the Bitcoin custody for investors. This is one of the advantages the ETFs hold over owning Bitcoin directly. Bottom Line With Bitcoin showing resilience by swift recovering from dips, consistent inflows into the spot ETFs, and growth of the AuM of the spot ETF funds - except for Grayscale ( GBTC ) which has recorded shrinking AuM due to its inordinate 2.5% fee - Bitcoin exposure should be a no-brainer for risk-tolerant investors. There is currently no safer or more direct medium to gain such exposure than through spot Bitcoin ETFs. After ten months since launch and showing good tracking performance and steady AuM growth, I reiterate that the Bitwise Bitcoin ETF is a great choice to gain direct exposure to Bitcoin. Bitwise is bound to see its total AuM and market standing steadily increase because of its expansion into other crypto ETPs. Bitwise now owns the largest physical Bitcoin ETP, the ET32 Ethereum staking ETP, and the ESOL Solana physical ETP, among others, as it acquired the European crypto ETP provider , ETC Group, in August. This expansion into the European market and diversification into other ETPs will not only increase Bitwise's total AuM but potentially lead to better economies of scale, which will help the fund maintain its low fees in the long term.
