Canadian bitcoin ETFs face price pressure after U.S. approvals

A day after U.S. regulators approved spot bitcoin ETFs, Canadian providers find themselves facing new competition, especially when it comes to fees.

The Securities and Exchange Commission approved 11 funds from asset managers such as BlackRock, Invesco and Fidelity late Wednesday.

The highly anticipated move creates new competition for Canada-listed bitcoin ETFs, which have an almost three-year head start but also come with higher management fees in some cases.

The fees on the 11 new U.S. bitcoin ETFs range from as low as 0.20% to 1.5%, and some firms are competing by waiving management fees for a certain period of time.

In Canada, the $2.2-billion Purpose Bitcoin ETF, the world’s first spot bitcoin ETF that launched in February 2021, has a management expense ratio (MER) of 1.49%.

On Thursday, Fidelity Investments Canada ULC said it was reducing the management fee of its Canada-listed Fidelity Advantage Bitcoin ETF to 0.39%, with an expected MER of 0.44% as of Jan. 12. The ETF’s MER as of Sept. 30 was 0.95%.

The U.S.-listed Fidelity Wise Origin Bitcoin Fund, which was approved Wednesday, has a 0.25% management fee that the fund manager is waiving until Aug. 1.

Other Canadian bitcoin ETFs also charge higher fees than the cheapest U.S. funds. The $541-million CI Galaxy Bitcoin ETF has a 0.40% management fee and 0.80% MER as of June 30. The $141-million Evolve Bitcoin ETF has a management fee of 0.75%. The 3iQ Bitcoin ETF’s management fee is 1% and its MER is 1.75%.

Purpose and Evolve both said they don’t plan to reduce fees on their funds.

Purpose chief investment officer Greg Taylor pointed to his firm’s history of managing the product through volatile periods.

“[W]hile fees are one component of the decision of where to invest, we think investors should put more of an emphasis on safety and track record when making that decision,” he said in an emailed statement.

Some analysts think that ETFs may help stabilize crypto prices by broadening their use and potential audience. But many remain concerned that crypto ETFs will place too much risk and volatility into Americans’ retirement accounts.

“The notorious price volatility of bitcoin, as well as its fluctuating values against stablecoins and other cryptocurrencies, could expose mainstream investors to a less familiar spectrum of investment risks,” said Yiannis Giokas, senior director of Moody’s Analytics.

The price of bitcoin was swinging on Thursday, a day after the approvals. Bloomberg reported that, as of 1 p.m., more than US$3.5 billion in shares of the 11 U.S. ETFs had traded.