A sharp divergence in exchange-traded fund (ETF) revenue streams reveals how investor demand for crypto exposure is overtaking traditional equity strategies in fee generation. Blackrock (NYSE: BLK), the world’s largest asset manager, is now estimated to be earning more from its Ishares Bitcoin Trust ETF (IBIT) than from its flagship Ishares Core S&P 500 ETF (IVV), signaling a growing shift toward digital assets in institutional portfolios.

While IBIT’s assets under management are nearly nine times smaller than IVV’s, its 0.25% expense ratio translates into roughly $187.2 million in annual revenue—just above the $187.1 million generated by IVV’s 0.03% fee, according to a Bloomberg calculation. Since its January 2024 debut, IBIT has gathered approximately $75 billion in assets and now holds over 55% of the total market share in bitcoin ETFs.

Increased regulatory clarity has played a pivotal role. U.S. regulators’ approval of spot bitcoin ETFs paved the way for institutional participation, unlocking demand from hedge funds, pension funds, and banks. As Bloomberg Intelligence notes, IBIT ranks among the top 20 ETFs by trading volume. Emphasizing investor willingness to pay more for non-traditional exposures seen as value-adds, Nate Geraci, president of Novadius Wealth Management, was quoted by the news outlet as saying:

IBIT overtaking IVV in annual fee revenue is reflective of both the surging investor demand for Bitcoin and the significant fee compression in core equity exposure.

Bespoke Investment Group co-founder Paul Hickey explained that bitcoin’s perceived role as a store of value has positioned it as a leader in the cryptocurrency market, outpacing other digital assets. He opined: “It’s an indication of how much pent-up demand there was for investors to gain exposure to bitcoin as part of their overall portfolio without having to open a separate account somewhere else.”

Larry Fink, CEO of Blackrock, has become remarkably supportive of bitcoin, a notable reversal from his earlier skepticism. He now regards bitcoin as a “digital gold” and a viable hedge against inflation and currency debasement, particularly amid rising national debt and geopolitical uncertainty. He stated that if sovereign wealth funds allocate just 2%-5% of their portfolios to bitcoin, its price could rise to “$500,000, $600,000, $700,000 per bitcoin.” Fink believes increased transparency and liquidity will accelerate bitcoin’s acceptance as a mainstream asset class.

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