Summary Bitcoin's breakout post-U.S. election led to a new ATH of $106k, driving robust inflows into spot Bitcoin ETFs, surpassing gold AUMs. BlackRock's iShares Bitcoin Trust ETF is recommended for Bitcoin exposure due to its size, healthy inflows, and lower fees compared to peers. IBIT's shares also trade at a marginal discount to its premium, and is the only spot Bitcoin ETF that trades at a discount to its premium as compared to peers. On a borad level, institutional demand for Bitcoin ETFs surged, with IBIT managing ~$53 billion, nearly half of the total spot Bitcoin ETF AUMs. The long-term bullish outlook on Bitcoin remains intact, with an expected price ascent through 2025; IBIT trades at a marginal discount, making it attractive. Investment Thesis Last month, Bitcoin finally broke out from the tight trading pattern it held for 7 months on the back of the U.S. election results. This led to the digital asset creating a new ATH record of $106k, backed by the optimism surrounding the pro-Bitcoin stance the incoming U.S. administration is expected to adopt. The bullishness in Bitcoin led to robust inflows into the spot Bitcoin ETFs, which also created their new records. For example, net inflows into Bitcoin ETFs recently crossed $100 billion in AUM and have also overtaken gold AUMs, signaling a strong shift in appetite for Bitcoin as an alternative asset that deserves allocation in portfolios. The price of Bitcoin has pulled back since creating the $106k ATH a few weeks ago, and I believe the digital asset is currently in a consolidation phase with long-term bullish indicators remaining intact. Given my optimism for Bitcoin, I continue to recommend BlackRock's iShares Bitcoin Trust ETF (NASDAQ: IBIT ) as the primary vehicle to hold Bitcoin for those investors who prefer Bitcoin exposure via ETFs over digital wallets. IBIT is now the largest spot Bitcoin ETF available, sees healthy inflows, and is cheaper relative to its peers, making this recommendation an easy Buy. IBIT Is The Cheapest ETF Available - See Its Premium To NAV My overall outlook on Bitcoin is bullish, and I continue to expect Bitcoin to move higher through next year on the back of improved price discovery and elevated demand rising not just from retail investors but also institutional buyers. In my last note on IBIT, I explained why IBIT presented itself “as a stable alternative for investors looking to invest in Bitcoin without the bells and whistles that come with directly investing in Bitcoin.” In that note, I talked about strong retail interest, which was driving momentum in spot Bitcoin ETFs such as IBIT, and how the Bitcoin halving that occurred earlier this year would eventually lead to decelerating Bitcoin supply and higher prices. Heavy institutional demand in spot Bitcoin ETFs has led to surging asset volumes for Bitcoin ETFs, leading to one of the sharpest spikes in AUMs among spot Bitcoin ETFs. 21Shares, an ETP firm that specializes in crypto-based ETFs/ETPs and partners with ARK on certain crypto ETFs in the US, issued a report last month where they noted that: Institutions strategically accumulated more bitcoin ETF shares during Q3 than they did in Q2, indicating sustained confidence among major institutional investors. 21Shares compiled data from Bloomberg and noticed that not only was Bitcoin ETF AUM from institutional investors rising, but so was the volume of institutional investors, which was behind the rapid ascent of Bitcoin ETF AUM this year. Separate research showed that Bitcoin ETFs collectively crossed over $100B in AUM, surpassing gold ETFs AUM as well. Exhibit A: Bitcoin ETFs surpassed gold-backed ETFs this year in terms of assets managed. (K33 Research) At the time of writing this note, the value of AUM in all spot Bitcoin ETFs totaled $112.6 billion. This is a remarkable feat these ETFs have been able to achieve, considering that 11 months ago most of these Bitcoin ETFs never existed. Exhibit B: Total Bitcoin ETF AUM trends through 2024 show growth stacked at the start and end of the year. (coinglass) Compared to all the Bitcoin ETFs, State Street’s SPDR Gold Trust (NYSEARCA: GLD ), the most popular gold ETF, has $73.3 billion in assets managed. Given that most gold ETFs, such as GLD, had a ~2-decade head start, the appreciation in AUMs by spot Bitcoin ETFs has marked a turning point in expandable appetite for Bitcoin ETFs. Leading the charge for Bitcoin ETFs is BlackRock's iShares Bitcoin Trust ETF, which is now the largest Bitcoin ETF by assets managed. With ~$53 billion in assets, IBIT is the largest spot Bitcoin ETF available to investors, surpassing its predecessor, Grayscale’s Bitcoin Trust ETF (NYSEARCA: GBTC ). Via IBIT, BlackRock continues to offer investors a stable and relatively cheap alternative for investors to get exposure to Bitcoin. IBIT’s $53 billion in assets managed also means IBIT’s assets account for almost half of the total ~$112 billion spot Bitcoin ETF AUMs I mentioned earlier. Exhibit C: Top Bitcoin ETFs ranked versus BlackRock’s IBIT Bitcoin ETF, ordered by AUM (Author's compilation of top Bitcoin ETFs) Clearly, from Exhibit C, I note that IBIT is the largest spot Bitcoin ETF by AUM and still has comparative ETF fees of just 0.25%, which is within the range of its peer ETFs, barring Grayscale’s GBTC ETF on the high end and BTC ETF on the low end of the fee spectrum. As can also be seen from Exhibit C, the YTD returns for most ETFs, barring Grayscale’s ETFs, fall within the ~104% average returns for the year. All the ETFs that I mentioned above in Exhibit C do trade at a premium to their NAV, which might put off some investors as they wait for a better entry point. Still, for those investors who have a bullish outlook on the underlying asset, Bitcoin, these nuances of ETFs don't really matter. But for those who are looking to deploy more capital, IBIT appears to be trading at a much more affordable premium as compared to its peers, as seen in Exhibit D below. Exhibit D: BlackRock’s IBIT trades at a much more affordable premium to its NAV as compared to the other top spot Bitcoin ETFs. (yCharts) Per the chart above, IBIT is trading at a razor-thin discount to its NAV as compared to its peers, which trade at razor-thin premiums as compared to their NAV. But as I mentioned earlier, as long as investors maintain a bullish outlook on Bitcoin, these specifics really do not matter for the average investor. My 2025 Outlook On Bitcoin Is Still Positive I had noted in my previous note on IBIT how halvings tend to be eventually positive for the price discovery of Bitcoin, leading to higher prices for the digital asset. With this year’s halving in April complete, we are now on our way to the fifth halving, and Bitcoin’s price ascent so far still looks on par if I look at the previous price trends since their respective halvings. Exhibit E: Bitcoin still has enough room to continue its ascent higher and should follow the price trajectories of its previous Bitcoin halvings. (glassnode) As noted by the fifth epoch, or cycle, in black in the chart above, we should continue to experience a higher price trajectory in Bitcoin, and I anticipate that to happen through the course of 2025. Additionally, global liquidity cycles also should get better through 2025, which is a strong indicator for Bitcoin to continue performing through next year. The chart below does indicate some compression in liquidity, but I view that as seasonal, and I expect the reversal in liquidity through next year, which should keep the momentum in Bitcoin and other Bitcoin ETFs such as IBIT. Exhibit F: elevated levels of Global liquidity bodes well for Bitcoin’s prices. (bGeometrics) Risks & Other Factors To Consider As I noted in the previous section, liquidity cycles globally tend to compress around the end of the year and the start of the new year. But in my opinion, these cycles usually will pick up unless there is a recession or severe global event that causes headwinds for global liquidity. In such cases, as we witnessed in Q1 2022, Bitcoin will face pressure and severe volatility. Another marginal headwind investors should note here is that 2025 could see an entire new suite of crypto-focused ETF products being pushed into the market. Last month, option-related products for many spot Bitcoin ETFs, including IBIT, started trading on markets. These option products come after Ethereum-based ETFs were launched mid-year. Bitwise has also filed an S-1 to launch an ETF that offers exposure to Bitcoin and Ethereum . There are more crypto products in the pipeline, which I expect will compete for crypto allocation of portfolio capital. This might put short-term pressure on Bitcoin. But, over the long term, these products harbor more opportunity for general crypto adoption, which is long-term positive for Bitcoin. Takeaway IBIT remains a strong ETF candidate for investors to allocate capital towards if they are interested in gaining or adding incremental exposure to Bitcoin via ETFs. The long-term indicators remain intact for Bitcoin to continue its ascent higher through 2025, and I expect ETFs such as IBIT to be beneficiaries of Bitcoin’s price ascent. The ETF also trades at a marginal discount to many of its ETF peers, which makes IBIT relatively attractive. I continue to recommend my Buy rating on IBIT.
