U.S. Bitcoin ETFs Set to Overtake Canadian Crypto ETFs

It looks like U.S. Bitcoin ETFs are finally getting the upper hand over Canadian crypto ETFs. Canada was once the frontrunner when it came to launching these funds, but now it’s losing ground. Why? Lower management fees and better liquidity! Let’s break down what’s happening.

The Canadian Crypto ETF Landscape

Canada was the first in the world to introduce Bitcoin ETFs, starting with Purpose Bitcoin ETF back in February 2021. This made it easier for local investors to dive into crypto while also giving a bit of a boost in credibility to the market. They could invest in these funds through tax-sheltered accounts like TFSAs and RRSPs. But now, the tables have turned.

In 2024, Canadian crypto ETFs saw outflows of C$1.1 billion. That’s a steep drop, especially when you consider the rest of the Canadian ETF market ended up with over C$500 billion in assets for the first time. So, what gives? The approval of U.S. Bitcoin ETFs is a big part of it.

The U.S. Bitcoin ETF Boom

Now that U.S. Bitcoin ETFs have been approved, they’ve come out swinging. For one, their management fees are lower. Take the iShares Bitcoin Trust ETF with its 0.25% fee, compared to many Canadian Bitcoin ETFs charging above 1%. Then there’s liquidity and higher trading volume making them a lot easier to buy and sell.

And let’s not forget, the regulatory environment in the U.S. has shifted to be more favorable, especially after last year’s presidential election. So, it was kind of a perfect storm for investors who wanted to put their money to work in crypto.

The Bigger Picture

The differences in regulations are also playing a huge role. Canada’s been ahead of the curve with clear guidelines and tax advantages, which gave it the upper hand for a while. But now, with U.S. Bitcoin ETFs gaining traction, things are changing fast.

Should we be concerned about the outflows from Canadian crypto ETFs? Yes and no. On one hand, it’s an acknowledgment of the competitive edge that U.S. Bitcoin ETFs are gaining. On the other, it shows the resilience and adaptability of the crypto market as it continues to evolve.

It’s a mixed bag—while the U.S. gets a leg up, Canadian investors might end up with better tax advantages. In the end, the best crypto strategy might just be to keep an open mind and diversify.