As Bitcoin continues its extraordinary surge in 2024, the world’s first cryptocurrency exchange-traded funds (ETFs), launched in Canada, are struggling to maintain their position amid stiff competition from newly approved US-based Bitcoin ETFs.
The Canadian Bitcoin ETFs, which debuted in February 2021, initially attracted billions of dollars in investments, offering a way for investors to gain exposure to the leading digital currency. However, with the introduction of US Bitcoin ETFs earlier this year, many international investors have begun redirecting their funds south of the border.
According to TD Securities, Canadian Bitcoin ETFs have experienced net outflows of C$578 million (around R7.3 billion) as of December 13, marking a stark contrast to the $36 billion (approximately R650 billion) in inflows seen by US Bitcoin ETFs over the same period.
Shift in Investor Preferences
Vlad Tasevski, head of asset management at Purpose Investments, which launched the world’s first Bitcoin ETF under the ticker BTCC, attributes the shift to the dominance of the US financial markets.
“Larger US and international investors prefer now to use the US ETFs because those are the markets where they predominantly trade all their other exposures,” Tasevski explained. “But that would’ve been expected because, in the end, the US is the biggest global capital market where most of the liquidity is.”
Despite losing some international clients, Tasevski noted that Canadian investors have slightly increased their holdings, making up more than 80% of the C$830 million fund’s customer base.
Unique Advantages of Canadian Bitcoin ETFs
For Canadian investors, the weaker Canadian dollar and the ability to manage currency risks play a key role in retaining local investments. Canadian Bitcoin ETFs offer options denominated in Canadian dollars and hedged against currency fluctuations, a feature that appeals to domestic investors.
“What the Canadian ETFs give you is options to manage your currency risks over the long term, and that’s something that is unique to the Canadian ones,” said Andres Rincon, head of ETF sales and strategy at TD Securities.
However, for investors looking to switch to US-based Bitcoin ETFs, lower management fees remain a significant draw. The Fidelity Advantage Bitcoin ETF in Canada offers a management expense ratio of 0.43%, the lowest among Canadian crypto ETFs, but several US ETFs feature even lower costs.
Bitcoin’s Meteoric Rise
Bitcoin has soared over 150% this year, cementing its position as the top-performing asset of 2024. This explosive growth has drawn unprecedented interest, with US Bitcoin ETFs capturing much of the momentum.
While Canada’s pioneering crypto ETFs still hold a niche appeal for domestic investors, the global spotlight has shifted to the US, where larger markets and lower fees are reshaping the competitive landscape.
