Bitcoin ETF was liquidated for the first time due to AI attracting money, and Hashdex products are about to be delisted

According to Woofun AI, US cryptocurrency asset management company Hashdex officially announced the closure and liquidation of its $14.7 million Bitcoin spot ETF product, which marks the first Bitcoin spot ETF liquidation case in the US market.

Although Bitcoin futures ETFs such as XBTF (XBTF.US) launched by VanEck in 2024 have previously been shut down, US funds that directly hold Bitcoin have never been liquidated before. Hashdex stated that the decision was based on a comprehensive assessment of the asset status, liquidity, operating costs, investor interest, and positioning of the product within the company's overall product line. Capital inflows to these ETFs, which were first approved in January 2024, have been declining as investors turn to AI-related investment products that provide higher returns.

The macro-level trend in capital migration is the root cause of this situation. The net outflows from these funds have been positive over the past three months. Vetle Lunde, head of K33 Research, wrote in a June report that against the backdrop of the continued rise in AI-related asset prices, the market generally believes that the opportunity cost of holding Bitcoin is too high.

This shift in capital preferences is evident in the data: According to the CoinDesk 20 (CD20) index, the iShares Future AI & Tech ETF (ARTY.US) launched by BlackRock (BLK.US) had a 39% increase as of July, with assets under management of $3.6 billion, while the overall decline in the cryptocurrency market was around 36% during the same period.

Data compiled by Woofun AI shows that of all US Bitcoin spot ETFs, Hashdex's BITCOIN ETF (DEFI.US) has the smallest net assets and the lowest cumulative net inflow; WisdomTree (WT.US), the second-smallest, has BTCW (BTCW.US) net assets of US$142.4 million, while the net assets of IBIT (IBIT.US) under market leader BLK.US (BLK.US) That's a whopping $47.08 billion.

Competitive disadvantages at the micro level have further accelerated the withdrawal process of DEFI (DEFI.US). According to documents filed with the US Securities and Exchange Commission, the last trading day for DEFI (DEFI.US) is August 17, after which the company will begin selling the remaining Bitcoin and distribute the cash to shareholders. The fund's unsuccessful development momentum is in stark contrast to the overall growth of the US Bitcoin spot ETF market — the latter's net assets have reached $77.6 billion, and its cumulative net inflow since inception is $51.5 billion. Hashdex only entered the Bitcoin spot market after a competitor.

Although it launched its DEFI (DEFI.US) product as a Bitcoin futures ETF in September 2022, it didn't switch to a spot product until the end of March 2024, which is almost three months behind the launch of IBIT (IBIT.US). At the time, the rate for this product was 0.25%, which was the same rate charged by BlackRock (BLK.US) and Fidelity, so investors were unable to get any fee discounts if they chose this smaller and less liquid product. Outside of the US, there have also been cases where spot cryptocurrency ETFs have been shut down. In November 2022, Cosmos Asset Management shut down its Australian-listed Bitcoin and Ethereum ETFs just six months after listing because the combined assets of the two funds were only around $1.1 million (about $710,000).

Hashdex's move is likely to herald the end of the Bitcoin spot ETF era. Currently, the largest portion of all capital inflows, or $60.5 billion, has gone to IBIT (IBIT.US), while approximately $9.95 billion has flowed into Fidelity's FBTC (FBTC.US). Grayscale GBTC (GBTC.US), which originally operated as a trust, had a capital outflow of $27.4.7 billion after switching to a Bitcoin spot ETF.

However, Hashdex will not exit the US cryptocurrency ETF market. The company still manages more than $200 million in assets through other products still issued in the US market, including the diversified Hashdex NASDAQ cryptocurrency index US ETF (NCIQ (NCIQ.US)). The media has reached out to Hashdex for comment.