Canadian crypto ETFs see outflows in first month since U.S. approvals

Spot bitcoin ETFs have been offered in the U.S. for only a few weeks, but they may already be having an effect on the Canadian market.

Since bitcoin ETFs began trading in the U.S. on Jan. 11, crypto ETFs listed in Canada saw $447 million in redemptions, according to a report from National Bank Financial. The outflows represent 10% of the funds’ assets at the beginning of the year.

“Investors either switched to U.S. products, or they may have been waiting for the U.S.-based ETF launch news as their exit point from bitcoin,” the report said.

The Purpose Bitcoin ETF, the world’s first spot bitcoin ETF that launched in February 2021, saw $196 million in outflows last month between its hedged and unhedged series, according to National Bank. The CI Galaxy Bitcoin ETF bled $200 million between its unhedged and U.S.-dollar series.

The U.S. Securities and Exchange Commission’s highly anticipated approval included ETFs from asset managers such as BlackRock, Invesco and Fidelity. The U.S. firms are competing on low fees, with some managers waiving management fees for a certain period.

According to Morningstar, the iShares Bitcoin Trust ETF saw inflows of US$2.6 billion last month, compared to US$2.2 billion for the Fidelity Wise Origin Bitcoin ETF.

The Grayscale Bitcoin Trust, on the other hand — whose court case was at the centre of the SEC approval — saw outflows of US$5.7 billion.

Equities led flows, while cash remained popular

Of the $3.9 billion that flowed into Canadian ETFs in January, $2.9 billion went to equity funds, with broad-sector U.S. funds, financials and all-equity asset allocation ETFs leading the way, National Bank said.

Despite regulatory changes that have affected the yields offered on popular high-interest savings account (HISA) ETFs, money market and HISA funds brought in $668 million in January, the report said. The CI High Interest Savings ETF, however, saw outflows of $231 million.

Elsewhere in fixed income, National Bank said investors moved away from short-term bond ETFs, “choosing instead to bet on mid- and long-term bonds, given the weakness in the economy and the corresponding possibility of declines in bond yields.”

Mark Burgess

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Mark was the managing editor of Advisor.ca from 2017 to 2024.