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It\u2019s been a little over a month since the bitcoin ETFs received regulatory approval to launch in the US.\u00a0<\/p>\n
It was a rocky start at first, with outflows from Grayscale\u2019s spot bitcoin ETF \u2014 which was converted from a bitcoin trust \u2014 outpacing inflows. To add to that, former exchange FTX also unloaded shares of the ETF<\/a>.\u00a0<\/p>\n However, last week\u2019s inflows came in at $1.1 billion, which is much higher than the $415 million of outflows from GBTC.\u00a0<\/p>\n Read more:<\/strong> A month after launch, spot bitcoin ETF weekly net inflows hit new high<\/a><\/p>\n \u201cUS-based spot Bitcoin ETF net flows are consistently positive, while sell pressure from Grayscale Bitcoin Trust outflows is abating,\u201d Thomas Perfumo, Kraken\u2019s head of strategy, told Blockworks.\u00a0<\/p>\n Valkyrie<\/a> co-founder Steven McClurg sat down with Blockworks to talk about their bitcoin ETF, which launched alongside BlackRock, Fidelity and a handful of others back in January.\u00a0<\/p>\n McClurg also touched on why the firm opted to add BitGo as a second custodian for BRRR.\u00a0<\/p>\n Keep reading for excerpts from Blockworks\u2019 interview.\u00a0<\/p>\n Blockworks<\/strong>: What have these first few weeks since launch been like for Valkyrie?<\/p>\n Steven McClurg<\/strong>: Our ETF AUM has doubled in the last two weeks so that\u2019s fantastic. I think, on a relative basis, we\u2019ve probably done the best out of all of the competitors given that it\u2019s 100% increase in AUM. It\u2019s also brought attention to some of our other products, like bitcoin miners, and that has seen an uptick in inflows as well.\u00a0<\/p>\n Blockworks<\/strong>: You dropped your fee to stay competitive<\/a> with the group. We\u2019ve seen a couple of others follow suit since launch. From a fee perspective, these are some of the lowest we\u2019re seeing out there. Can you talk about that?<\/p>\n McClurg<\/strong>: We didn\u2019t expect to see a fee war<\/a> for the first couple of years but we\u2019re there now. What you don\u2019t want to be is the outlier in fees. A couple of issuers did make that mistake and they suffered for it. But as long as you\u2019re within the range of 20 to 35 basis points, there\u2019s no correlation between your inflows, AUM, and your fees. Now, if you\u2019re an outlier outside of 35 basis points, it does have a negative impact. So we watch that pretty closely. We lowered our fees \u2014 we\u2019re not the cheapest, but we\u2019re not the low-cost provider as well. We think about things [like] cybersecurity and other issues that are extremely important when it comes to managing bitcoin, and we want to make sure that we have padding. Fees make sure that we can cover those concerns.\u00a0<\/p>\n Blockworks<\/strong>: Speaking of cybersecurity, Valkyrie\u2019s the only one to announce a secondary partnership to custody bitcoin for the ETF, right?<\/p>\n McClurg<\/strong>: That\u2019s correct. Bitcoin custody<\/a> doesn\u2019t fall under the custodian role, which allows you to have a fully separated special-purpose vehicle for the purpose of custodying securities<\/a> because bitcoin isn\u2019t a security. I\u2019m old enough to remember when all the large banks fell during the financial crisis, and if you were a trader back then \u2014 which I was \u2014 if you were only trading with Lehman Brothers or Bear Stearns for your commercial mortgage-backed securities, then you had some issues when those banks fell. We believe in a multiple custodial approach when it comes to bitcoin, and not just keeping all your coins in one wallet.<\/p>\n Blockworks<\/strong>: Some issuers have made their wallet addresses public, though some are also opting to keep that information private. What are your thoughts?<\/p>\n Read more:<\/strong> Bitwise publishes bitcoin ETF holdings address after on-chain sleuths uncover BlackRock\u2019s<\/a><\/p>\n McClurg<\/strong>: I don\u2019t see a need to make the wallets public. We, as everyone else who has an ETF, utilize a fund administrator who also doubles down as a qualified custodian of cashing securities, ours being US Bank, and they have access to the wallet information. They know where it is and what\u2019s in it. I think it\u2019s nice that some people put the wallet address out there, but it does pose a major cybersecurity<\/a> risk, and that\u2019s not something we would do.\u00a0<\/p>\n Blockworks<\/strong>: Do you think the next hurdle, not that we\u2019ve kind of seen the fee war play out ahead of your timeline, are ad spends for bitcoin ETF issuers<\/a>?<\/p>\n McClurg<\/strong>: I think a handful are going to spend quite a bit of money on ads\u2026we\u2019re looking at this as a marathon, not a sprint. Our focus is just elsewhere, we\u2019re spending time educating financial advisors, and educating the general public on what bitcoin is and how this is a great allocation for their portfolio. I think, generally, the advertising plays more to the retail market, and the retail market is pretty baked in as far as AUM. The next step is going to be financial advisors, and institutions.<\/p>\n Blockworks<\/strong>: Have you had conversations with those financial advisors?<\/p>\n McClurg<\/strong>: Absolutely. Overwhelmingly, the response is that they\u2019re not ready yet. [We expected] that it would take one to three years for financial advisors, at least from the larger platforms, to move client money into bitcoin. I think it\u2019ll end up being very similar to the way allocations for gold went, with 1% to 2% being allocated to protect against inflation in the long run. We\u2019ve also experienced a lot of interest in our bitcoin mining<\/a> ETF and that has thrived in this environment as they look for something bitcoin adjacent. That\u2019s where we expect to see the flows come in over the next year, and then bitcoin ETFs<\/a> over the next one to three years.<\/p>\n
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