Bitcoin mining isn’t what it used to be, and for ETFs that have been taking bigger and bigger bites of the market, that is a benefit.

Currently, the reward for successfully mining a block is 3.125 bitcoin, and the average of 144 blocks mined each day puts roughly 450 bitcoin into circulation. ETFs have reportedly been accruing multiples of that amount, meaning that the supply held outside of ETFs is shrinking. And while the companies that mine it sell a significant amount, they also sit on some of the bitcoin they acquire. “Ever since ETFs brought new buyers into the space in enormous numbers, ETFs alone are buying [an equivalent of more than] all of the bitcoin that is created every day,” said Matthew Sigel, head of digital assets research at VanEck. “Bitcoin is for everyone. Prior to ETFs, it was very hard for a fiduciary to buy bitcoin.”

Chop, Chop

The reward for mining bitcoin is cut in half roughly every four years, or when 210,000 blocks are mined. The vast majority of the bitcoin that will ever exist is already owned, although mining isn’t projected to finish until sometime next century, when the cap of 21 million total bitcoin is reached. There are about 20 million circulating currently. Unlike traditional currencies, more bitcoin can’t simply be printed, and that fact is a huge draw for investors.

Since spot bitcoin ETFs became available last year, they’ve snapped up the crypto asset at a remarkable pace. The largest one, BlackRock’s iShares Bitcoin Trust ETF (IBIT), represents more than $58 billion, or about half of the total US-listed spot bitcoin assets. A more telling number, though, is 3%, which is the share of the total bitcoin market held in that single ETF, according to BlackRock. “Given the size of some of the largest ETFs … one might think that buying and selling within those funds significantly moves market prices,” a BlackRock spokesperson said. “However, it is asset allocation decisions made by asset owners, such as pension funds and individuals, that drive net flows into different assets.”

On that note, institutional investors are interested. Brown University’s endowment recently disclosed that it owns about $5 million of IBIT. Scarcity is by design:

• Since 2009, the reward for mining has been halved four times, going from an initial level of 50 bitcoin per block to just 3.125. The next halving is likely to take place in 2028.
• VanEck’s price target for bitcoin later this year is $180,000, or nearly double the current price of less than $95,000. Rate cuts by the Fed would be a possible catalyst to the price increase, Sigel said.

Fixed game: “This is exactly why I own bitcoin. When a fixed-supply asset like bitcoin is denominated in a fiat currency with a theoretically unlimited supply, the price tends to go up over time,” said Mike Alfred, managing partner of private investment partnership Alpine Fox. “It’s just math.”

There’s no need to fear, more VIX exchange-traded funds are here.

With equity markets still climbing out of a slump from February highs, asset managers are looking to CBOE’s Volatility Index — which measures the stock market’s volatility based on S&P 500 options and is often called the “fear gauge” — to understand investor sentiment. And with the VIX hitting about 40% so far this year, the economy can feel like a horror movie at times.

Defiance ETFs is launching three funds that track the VIX, according to a filing last week. The Defiance Vol Carry Hedged ETF seeks to generate income during periods of stable or declining market volatility. The Defiance Enhanced Short Vol ETF would employ a dual-structure that shorts the VIX and goes long on the S&P 500, while the Defiance Enhanced Long Vol ETF would do the opposite.

Anxious investors are looking for potential hedges and issuers are going to take advantage of that, but all the economic woes and uncertainty might just be a short-term environment. “After the rain, all the mosquitoes come out,” said Kash Ahmed, president of RIA American Private Wealth. “We’ve had a lot of volatility, and Wall Street is now peddling out products that cater to peoples’ fears.”

Fear Factor

Currently, some $3.1 billion is invested in VIX-focused ETFs, according to CFRA Research. And some of the larger funds have performed quite well this year:

• Both Barclays’ iPath Series B S&P 500 VIX Short-Term Futures ETN and the ProShares VIX Short-Term Futures ETF are up 35% year-to-date.
• Over that same time, however, those funds had $212 million and $118.5 million in outflows, respectively, according to VettaFi data.

Don’t Be Afraid. Volatility ETFs may be alluring, especially in the current environment, but are they the best option for investors? Specifically in the case of long VIX ETFs, they typically lose investors’ money, said Lan Anh Tran, manager research analyst for Morningstar. “Long-term track records on any long VIX futures ETFs can paint an obvious and painful picture: Most of them end up in the red after a year or two, losing as much as 70% of their value,” she told ETF Upside.

Simplify ETFs is living up to its name, cutting half a dozen funds from its line.

Doing some house cleaning is hardly unusual in the exchange-traded fund business, where issuers have been putting out new products at an accelerated pace for years. Not everything is going to be a winner, and unlike with recreation league youth sports, there are no participation medals. In Simplify’s case, it is culling six ETFs launched between 2022 and last year. The common issue wasn’t performance, which varied considerably, but inflows may have been a challenge. All of the strategies were small, in one case as little as $1 million.

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