Key Takeaways
- • Invesco and Galaxy Asset Management launched the Invesco Galaxy Bitcoin ETF (BTCO) on January 11, 2024, trading on the Cboe BZX Exchange, providing exposure to physically held bitcoin.
- • Invesco is waiving the entire sponsor fee on the first $5 billion of trust assets for six months, reducing BTCO's total expense ratio from 39 basis points to zero during that period, with discretion to extend the waiver.
- • Galaxy acts as execution agent for buying and selling bitcoin for cash on behalf of BTCO, and Coinbase provides institutional-grade custody of the ETF's bitcoin holdings.
- • BTCO prices bitcoin using the Lukka Prime Bitcoin Reference Rate, a fair market value benchmark aligned to GAAP and IFRS guidelines, calculated by independent data firm Lukka Inc.
- • Galaxy Asset Management reports US$5.3 billion in AUM as of November 30, 2023, while Invesco reports over US$430 billion in ETF AUM as of the same date.
Summary
Galaxy Asset Management and Invesco Ltd. (NYSE: IVZ) announced on January 11, 2024 the launch of the Invesco Galaxy Bitcoin ETF (BTCO), which began trading that day on the Cboe BZX Exchange. According to the announcement, BTCO invests directly in physical bitcoin, giving investors exposure to the market price of bitcoin as measured by the Lukka Prime Bitcoin Reference Rate within an ETF structure intended to provide additional safeguards and ease of trading.
Invesco is waiving the fund's entire fee on assets up to $5 billion for the first six months after launch, which lowers the total expense ratio from 39 basis points to 0 basis points during that period. The sponsor retains discretion to extend the waiver. Invesco described the partnership as a key differentiator, with Brian Hartigan, Global Head of ETF Investments at Invesco, saying the firm has high conviction that digital assets can be transformative and that bringing BTCO into a regulated market helps democratize the asset class. Steve Kurz, Global Head of Galaxy Asset Management, cited the firms' experience managing crypto ETPs in Canada, Brazil and Europe, and a cash-creation bitcoin ETF in Canada, as the basis for what he described as low fees, strong liquidity and minimal tracking error.
Galaxy serves as execution agent, buying and selling bitcoin for cash on behalf of the ETF, which the release says may benefit the execution of creations and redemptions. Coinbase provides custody, with holdings kept in tamper-proof hardware modules in secure data centers. The Lukka Prime Bitcoin Reference Rate, which reflects the execution price on the bitcoin market's principal market as determined by Lukka, is used to set the fund's fair market value.
The announcement notes that Galaxy Asset Management had US$5.3 billion in AUM as of November 30, 2023, and that Invesco had over US$430 billion in AUM as of the same date, including the Invesco QQQ. Galaxy Asset Management is an affiliate of Galaxy Digital Holdings Ltd. and is not affiliated with Invesco. The fund's prospectus carries standard risk disclosures, including that bitcoin has historically exhibited high price volatility, that the trust's value could decline rapidly including to zero, that the trust will not match bitcoin's performance due to sponsor fees and other expenses, and that shares may trade at a premium or discount to NAV. The fund intends to create and redeem principally for cash, which may make it less tax efficient than in-kind ETFs.
Invesco is waiving the fund's entire fee on assets up to $5 billion for the first six months after launch, which lowers the total expense ratio from 39 basis points to 0 basis points during that period. The sponsor retains discretion to extend the waiver. Invesco described the partnership as a key differentiator, with Brian Hartigan, Global Head of ETF Investments at Invesco, saying the firm has high conviction that digital assets can be transformative and that bringing BTCO into a regulated market helps democratize the asset class. Steve Kurz, Global Head of Galaxy Asset Management, cited the firms' experience managing crypto ETPs in Canada, Brazil and Europe, and a cash-creation bitcoin ETF in Canada, as the basis for what he described as low fees, strong liquidity and minimal tracking error.
Galaxy serves as execution agent, buying and selling bitcoin for cash on behalf of the ETF, which the release says may benefit the execution of creations and redemptions. Coinbase provides custody, with holdings kept in tamper-proof hardware modules in secure data centers. The Lukka Prime Bitcoin Reference Rate, which reflects the execution price on the bitcoin market's principal market as determined by Lukka, is used to set the fund's fair market value.
The announcement notes that Galaxy Asset Management had US$5.3 billion in AUM as of November 30, 2023, and that Invesco had over US$430 billion in AUM as of the same date, including the Invesco QQQ. Galaxy Asset Management is an affiliate of Galaxy Digital Holdings Ltd. and is not affiliated with Invesco. The fund's prospectus carries standard risk disclosures, including that bitcoin has historically exhibited high price volatility, that the trust's value could decline rapidly including to zero, that the trust will not match bitcoin's performance due to sponsor fees and other expenses, and that shares may trade at a premium or discount to NAV. The fund intends to create and redeem principally for cash, which may make it less tax efficient than in-kind ETFs.
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