Spot bitcoin exchange-traded funds (ETFs) have now reached their first month anniversary of trading, but there is a possibility that by the end of the year, the ETF field may end up shrinking.
This was a prediction from Steven McClurg, the Chief Investment Officer at Valkyrie Funds. He stated that of the ten issuers operating currently, only seven to eight will be in the market by the year-end.
The prediction
He stated that this was likely to happen because of the cost associated with running a spot bitcoin ETF, particularly because there is a lot of competition right now.
Thus, it is highly likely that some issuers, who are already struggling, may decide to step out of the market altogether.
McClurg said that if they do not manage to accumulate about $100 million worth of assets under management (AUM), then they might as well drop it.
On January 10th, the US Securities and Exchange Commission (SEC) granted approval for the first batch of spot Bitcoin ETF applications and they have seen a high inflow of funds since then.
The first day alone saw a total of $4.5 billion traded in spot Bitcoin ETFs, which is considered huge by any standard.
As for the last day, Bloomberg analyst James Seyffart revealed that the total amount of inflows stood at $400 million.
The events
McClurg stated that the events in the market in the previous month had been in line with what Valkyrie had expected before the launch.
He added that the only exception had been Grayscale, given that they had expected higher outflows from it.
Grayscale got approval for converting its trust into an ETF, which resulted in a sell-off in Bitcoin that pushed its value below $41,000 before it rebounded.
However, even though this sell-off has eased off for now, McClurg believes that there will be more outflows and these will be spread across different ETFs.
The market
There is steep competition in the market for Valkyrie, as there are nine other ETF issuers, which include Wall Street goliaths like Fidelity and BlackRock.
In the last month, the Fidelity Wise Origin Bitcoin Fund and BlackRock’s iShares Bitcoin ETF had already managed to accumulate assets under management worth $3 billion.
Meanwhile, the inflows in Bitwise’s ETF and that of Ark Invest’s 21Shares have also seen inflows of more than $700 million.
With that in mind, McClurg said that they were satisfied with Valkyrie’s performance and that it had managed to outperform ETFs being operated by large issuers.
He stated that this is because of the company’s history of working in traditional markets as well as digital assets.
On February 8th, the total AUM that Valkyrie had stood at $123.7 million, which is a smaller figure than its rivals.
But, according to McClurg, their goal is not to beat rivals like Fidelity and BlackRock because they have a huge market share. However, he added that they were doing quite well in the second tier.