Key facts
- Hashdex will liquidate its U.S. spot bitcoin ETF, DEFI, after August 17.
- This marks the first liquidation of a U.S. spot bitcoin ETF.
- The fund held $14.7 million in net assets.
- Dwindling investor interest and a shift towards AI investments are cited as reasons for the closure.
- Net outflows have been observed across U.S. spot bitcoin ETFs for the past three months.
Hashdex will liquidate its U.S. spot bitcoin exchange-traded fund, DEFI, after August 17, marking the first closure of such a product in the United States. The fund, which held $14.7 million in net assets, is the smallest among U.S. spot bitcoin ETFs. Bitcoin futures ETFs have been liquidated before, but this is the first instance for a fund holding bitcoin directly.
Hashdex cited a comprehensive evaluation of the fund's assets under management, liquidity, operating costs, investor interest, and its strategic fit within the company's product lineup as reasons for the closure. The decision comes as investor interest in crypto ETFs has waned, with capital increasingly flowing into AI-related investments that have offered significantly higher returns. Data indicates that U.S. spot bitcoin ETFs, as a group, have experienced net outflows for the past three consecutive months.
According to K33 Research head Vetle Lunde, many market participants view the opportunity cost of holding bitcoin as too high given the soaring performance of AI-related assets. For instance, BlackRock's iShares Future AI & Tech ETF gained 39% through July, while the crypto market, as measured by the CoinDesk 20 Index, fell approximately 36% during the same period.
The DEFI ETF's final day of trading will be August 17. Following this, the fund will proceed to sell its remaining bitcoin holdings and distribute the cash proceeds to its shareholders, as per a filing with the U.S. Securities and Exchange Commission (SEC). This closure contrasts with the overall growth of the U.S. spot bitcoin ETF market, which collectively manages $77.6 billion in net assets and has seen substantial net inflows since its inception.
Hashdex entered the spot bitcoin ETF market later than many competitors. While it initially launched DEFI as a bitcoin futures ETF in September 2022, it did not convert to a spot product until late March 2024, several months after major players like BlackRock launched their spot bitcoin ETFs. At the time of its conversion, DEFI's expense ratio of 0.25% was competitive with offerings from BlackRock and Fidelity, but it did not provide a fee advantage for investors choosing a smaller, less liquid product.
Spot crypto ETF closures have occurred in other markets. In November 2022, Cosmos Asset Management withdrew its Australian-listed bitcoin and ether ETFs after attracting only about $710,000 in combined assets within six months. Hashdex's decision is not expected to signal the end of the spot bitcoin ETF market, as the majority of inflows have been concentrated in dominant funds like BlackRock's IBIT and Fidelity's FBTC, despite significant outflows from Grayscale's GBTC. Hashdex will continue to manage over $200 million across its other U.S.-available crypto ETF products.