European crypto ETP inflows rise after BlackRock bitcoin filing

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European crypto-related exchange traded products have seen a boost in flows after BlackRock applied to launch a bitcoin fund in the US.

Europe-domiciled ETPs with crypto-related names had net inflows of €150mn in June, their best month since March 2022, Morningstar data shows.

The inflows came after €100mn of outflows in May and were followed by a further €60mn of inflows in July.

This followed a similar trend globally, with inflows totalling $610mn (€560mn) in June and July, according to CoinShares data.

BlackRock filed an application with the US regulator to launch a spot bitcoin exchange traded fund in June, sparking a flurry of similar applications from firms including Fidelity, Invesco and WisdomTree.

A spot ETF would directly track the price of bitcoin, as opposed to ETFs tracking the price of bitcoin futures contracts, a number of which have received US regulatory approval.

Hector McNeil, founder and co-chief executive officer of HANetf, said BlackRock’s application had had a “very positive” impact on bitcoin ETP flows and the price of bitcoin.

“[This is] mainly because of the anticipation of the demand that would be generated [by the launch],” he said.

“But most importantly, it has helped move the asset class into the mainstream, when the world’s largest asset manager, who has previously been negative, moves to raise their hand that they have changed their minds.

“Other asset managers have and will follow, as will more investor types,” McNeil added.

Martin Bednall, chief executive of Jacobi Asset Management, said he had “never seen” such anticipation for regulatory approval of ETFs.

“Whether the SEC is close to approving [BlackRock’s application] is conjecture,” McNeil said.

“However, it does seem bizarre to approve a bitcoin futures ETF and not a spot [ETF].”

Globally, crypto ETPs posted nine straight weeks of net outflows before the news of BlackRock’s application, totalling $400mn, according to CoinShares.

But the outflows were offset by the inflows after BlackRock announced its application.

James Butterfill, head of research at CoinShares, which manages digital assets ETPs, said the previous outflows were “largely driven by negative sentiment stemming from US regulatory posturing”.

“The mere announcement of BlackRock’s desire to initiate a bitcoin ETF has already bolstered confidence, with the implicit signal that the world’s largest asset manager endorses bitcoin,” he said.

“If BlackRock were to launch an ETF, it could dispel much of the lingering negativity surrounding crypto, potentially resulting in significant new investments as other investors follow their lead,” Butterfill added.

However, Manan Agarwal, quantitative analyst at Morningstar, said there was no reason to believe that the apparent optimism for cryptocurrencies would be sustained for long.

“It is important to keep in mind that similar products [to BlackRock’s application] were also launched in other countries, including Canada, Brazil and Dubai,” he said.

“Optimism, when products are launched followed by a period of dull growth and poor performance, has been the common trend across all such products.”

Agarwal added that the ratio of open interest in bitcoin perpetual futures, the number of outstanding derivative contracts that have not been settled, to bitcoin’s market cap is well below the highs seen in September last year.

“A stagnant ratio indicates money has been slow to flow into the market despite the bitcoin price rise,” he said.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.