Zhitong Finance APP notes that this is a record year for Bitcoin, but the initiators of the world's first ETFs that hold this cryptocurrency seem to be facing the risk of falling behind.

In February 2021, Bitcoin ETF was launched in Canada, becoming the world's first ETF. This attracted billions of dollars from both Canadian and foreign investors who wanted to invest in this original digital currency. However, when Bitcoin ETFs in the USA were approved earlier this year, some investors began to reconsider their cryptocurrency investments in Canada.

According to data compiled by TD Securities, as of December 13, the net outflow amount for Canadian Bitcoin ETFs has been 0.578 billion CAD (0.405 billion USD) so far this year. Cryptocurrency ETFs are the only category of ETFs in Canada this year to experience a net outflow of funds, while as of December 16, the inflow amount for Bitcoin ETFs in the USA reached a record 36 billion USD. Bitcoin has surged over 150% this year.

Vlad Tasevski, head of Asset Management at Purpose Investments Inc., which owns the world's first Bitcoin ETF, stated that some US investors who previously invested in Canadian Bitcoin ETFs have now turned to US Bitcoin ETFs.

"Large US and international investors are now actually more inclined to use US ETFs, as these markets are their primary markets for trading all other risk exposures," Tasevski stated. "But this was also expected, as we know that the USA is the largest capital market in the world, where most of the liquidity is located."

Although the Purpose Bitcoin ETF has seen outflows from international investors this year, Tasevski noted that there has been a slight net inflow of funds from Canadian investors, who make up more than 80% of the fund's approximately 0.83 billion CAD client base.

For Canadian investors, a weaker Canadian dollar may encourage them to keep their investments in the country. Andres Rincon, sales and strategy director at TD Securities ETF, stated that Canadians prefer to invest in their own currency, and the Canadian Bitcoin ETF can be priced in Canadian dollars and hedged.

Rincon mentioned, "What Canadian ETFs really give you is the option for long-term management of currency risk, which is unique to Canadian ETFs."

For investors turning to the USA Bitcoin ETF, one potential benefit is the lower management fees. The management fee rate of the Fidelity Bitcoin ETF is the lowest among Canadian Bitcoin ETFs at 0.43%, while many Other ETFs have management fees exceeding 1%. The largest Bitcoin ETF in the USA, the iShares Bitcoin Trust ETF, has a rate of 0.25%.

Tiffany Zhang, an analyst at National Bank, commented, "The most important reason Canadian investors favor USA spot Bitcoin and spot Ethereum ETFs is actually the fees and liquidity. The subtle differences in the indices used and management fees will become the biggest drag on ETF returns."

Zhang noted that the timing of the launch of these ETFs has led to the differences in management fees. When the Canadian Bitcoin ETF was launched in 2021, Bitcoin was a difficult asset class to obtain, but now that Bitcoin is easier to access and competition is more intense, the USA ETFs launched earlier this year with lower management fees.

Some Canadian ETFs have since reduced fees, but due to higher trading volumes, USA ETFs have more flexibility to lower costs.

Paul Cappelli, strategy director at Galaxy ETF, stated that while USA Bitcoin ETFs have impacted the Canadian market, they are not the only factor causing Outflow.

The Canadian Bitcoin ETF market is more mature than the USA market, so we see that investors are more strategic compared to the early growth in the USA," Cappelli said. "Therefore, profit-taking and other factors may affect individual investors' decisions.

The USA presidential election and the resulting expectation of a friendlier regulatory environment for USA Cryptos is a small highlight for Canadian Funds.

Cappelli said, "Since the USA elections a month ago, interest in Bitcoin has increased, with almost all indicators from traffic to trading volume and prices on the rise."

Compared to the USA, the Canadian Cryptos ETF has seen a smaller increase after the election, which is not enough to reverse the continuous outflow of funds from Canadian Cryptos ETFs for five months since the launch of the USA ETF in January.

Although the net flow of Canadian Bitcoin ETFs will be negative this year, TD's Rincon believes that with the impending reforms from the USA Securities and Exchange Commission, the Cryptos ETF industry will welcome more favorable winds, as these reforms may spawn more types of ETFs.

He said, "If there are more Cryptos applications in the USA and some of them are also transferred to Canada, I would not be surprised."