Struggle over Bitcoin: How US ETFs Endanger the Canadian Market

The world of Bitcoin ETFs has experienced an impressive rise, but while the US markets flourish, the pioneers from Canada might fall behind. The first Bitcoin ETFs were introduced in Canada in February 2021, attracting billions from Canadian and international investors. However, with the approval of US Bitcoin ETFs earlier this year, a capital outflow from the Canadian funds has begun. As of December 13, Canadian Bitcoin ETFs have experienced net outflows of CAD 578 million (USD 405 million), according to data from TD Securities. This contrasts with the US Bitcoin ETFs, which have recorded impressive inflows of USD 36 billion by December 16. The price of Bitcoin has more than doubled over the course of the year. According to Vlad Tasevski of Purpose Investments, some American investors are withdrawing their investments from the Canadian ETFs and investing in the US markets instead, emphasizing the deeper market influence of the US, resulting in a shift of liquidity. Simultaneously, a contrary trend is emerging within Canada: despite international outflows, Canadian Bitcoin ETFs are seeing slight net inflows from domestic sources. One reason could be the weak Canadian dollar, which keeps local investors engaged. Moreover, Canadian Bitcoin ETFs are often denominated and hedged in Canadian dollars, helping investors manage long-term currency risks. Another factor cited by investors when choosing a US ETF is the lower management fees. While the Fidelity Advantage Bitcoin ETF in Canada offers an expense ratio of 0.43%, the largest in the US, the iShares Bitcoin Trust ETF, charges only 0.25%.