First U.S. spot bitcoin ETF to close as inflows dwindle, investors chase AI returns

Crypto asset manager Hashdex is set to close and liquidate its $14.7 million spot bitcoin $BTC$63,518.30 exchange-traded fund, in what may be the first liquidation of a U.S. spot bitcoin offering.

Bitcoin futures ETFs have closed before, including VanEck’s XBTF in 2024, but no U.S. fund holding bitcoin directly appears to have previously been liquidated.

Hashdex cited an evaluation of the fund’s assets under management, liquidity, operating costs, investor interest and its place within the company’s broader product lineup when announcing the closure.

Flows into the ETFs, which were first approved in January 2024, have dwindled as investors chased the better returns offered by AI-related investments. Taken as a group, the funds have seen net outflows in each of the past three months, according to data from SoSoValue.

“Much of the market views the opportunity cost of holding $BTC as too high while anything AI-related soars,” K33 Research head Vetle Lunde wrote in a June report.

BlackRock’s iShares Future AI & Tech ETF gained 39% through July and held $3.6 billion in assets while the crypto market fell roughly 36%, based on the CoinDesk 20 (CD20) Index.

The Hashdex Bitcoin ETF (DEFI) is the smallest of the U.S. spot bitcoin ETFs by net assets and recorded the lowest cumulative net inflows, according to SoSoValue data. The second-smallest, WisdomTree’s BTCW, has $142.4 million in net assets. Market leader BlackRock’s IBIT holds $47.08 billion in net assets.

DEFI’s final day of trading will be Aug. 17, after which it will start selling its remaining bitcoin and distribute the cash proceeds to shareholders, according to a filing with the U.S. Securities and Exchange Commission (SEC).

The fund’s failure to gain traction contrasts with the growth of the broader U.S. spot bitcoin ETF market, which holds $77.6 billion in net assets and has received a cumulative $51.5 billion in net inflows over its lifetime.

Hashdex entered the spot bitcoin market after its competitors. While it introduced DEFI as a bitcoin futures ETF in September 2022, the fund didn’t convert into a spot product until late March 2024. That’s nearly three months after IBIT’s launch.

The 0.25% expense ratio at the time matched those charged by BlackRock and Fidelity, giving investors no fee discount for choosing the smaller and less liquid product.

Spot crypto ETF closures have occurred outside the U.S. In November 2022, Cosmos Asset Management pulled its Australia-listed bitcoin and ether ETFs just six months after their debuts after the two funds attracted only about 1.1 million Australian dollars ($710,000) in combined assets.