First U.S. spot bitcoin ETF liquidation hits as capital flees to AI funds

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Hashdex is pulling the plug on its U.S. spot bitcoin exchange-traded fund, marking what appears to be the first U.S. spot bitcoin ETF liquidation involving a fund that holds bitcoin directly rather than futures contracts. The Brazilian asset manager’s DEFI fund, the smallest of its peer group with just $14.7 million in net assets, will stop trading after August 17, according to a filing with the U.S. Securities and Exchange Commission reported by CoinDesk. The closure lands at a moment when investor enthusiasm is visibly tilting away from crypto and toward artificial intelligence plays.

Key takeaways

Hashdex will liquidate its DEFI spot bitcoin ETF after August 17, selling remaining bitcoin and distributing cash to shareholders.
DEFI held just $14.7 million in net assets, dwarfed by WisdomTree’s BTCW ($142.4 million) and BlackRock’s IBIT ($47.08 billion).
It is the first liquidation of a U.S. fund that holds bitcoin directly; earlier closures involved futures-based ETFs.
Bitcoin ETFs as a group have posted net outflows for three straight months as money rotates into AI-linked funds.
BlackRock’s iShares Future AI & Tech ETF gained 39% through July while the crypto market, tracked by the CoinDesk 20 Index, fell about 36%.

Hashdex to Liquidate U.S. Spot Bitcoin ETF DEFI

DEFI’s trading will end after August 17, after which Hashdex will begin selling off the fund’s remaining bitcoin holdings and returning the cash proceeds to shareholders. That timeline, laid out in the SEC filing, puts an unusually clear end date on a product that never managed to build meaningful scale.

Details of the liquidation and timeline

Bitcoin futures ETFs have shut down before — VanEck’s XBTF closed in 2024 — but no U.S. fund holding bitcoin itself had ever been liquidated until now. That distinction matters: futures-based products carry different cost structures and investor bases than spot funds, so this closure represents a first for the segment that emerged after the SEC approved spot bitcoin ETFs in January 2024.

Comparison of DEFI’s assets with competitors

The size gap tells its own story. DEFI’s $14.7 million in net assets looks almost negligible next to WisdomTree’s BTCW, which holds $142.4 million, and especially against BlackRock’s IBIT, the category leader with $47.08 billion under management. A fund that small struggles to cover its own operating costs, let alone compete on visibility with giants that dominate trading volume and brand recognition.

Reasons Behind DEFI ETF Closure

Hashdex pointed to a mix of practical and strategic factors behind the decision, not a single dramatic trigger. The company cited low assets under management, thin liquidity, ongoing operating costs, weak investor interest, and how the fund fit within its broader lineup of products.

Liquidity and operating cost challenges

Small ETFs face a structural disadvantage: fixed operating costs don’t shrink just because assets stay low. With only $14.7 million in the fund, every basis point of expense weighs more heavily on returns, and thin trading volume can widen spreads for the investors who do hold shares.

Strategic evaluation and investor interest

Hashdex also entered the spot bitcoin race later than its rivals. The company launched DEFI as a bitcoin futures ETF back in September 2022, but it didn’t convert into a spot product until late March 2024 — nearly three months after IBIT had already hit the market. Its 0.25% expense ratio matched what BlackRock and Fidelity charged, so there was no pricing edge to offset the late start or the smaller, less liquid footprint.

Shifting investor flows toward AI-related ETFs

This is where the closure connects to a wider market shift. Flows into bitcoin ETFs as a group have dwindled since their January 2024 debut, and the funds have logged According to SoSoValue data, outflows have occurred during each of the last three months. K33 Research’s Vetle Lunde stated in a June report that “the market largely perceives the opportunity cost of holding BTC as excessive given the surge in AI-related investments.”. That single line captures why capital that once chased bitcoin exposure is now flowing somewhere else entirely.

Market Trends and Performance Contrasts

The numbers behind that shift are stark. BlackRock’s iShares Future AI & Tech ETF gained 39% through July and pulled in $3.6 billion in assets, while the broader crypto market — as measured by the CoinDesk 20 Index — fell about 36% over the same stretch. That kind of performance gap helps explain why even sophisticated institutional money has been drifting toward AI-themed products instead of digital assets.

Performance of AI-related ETFs versus crypto ETFs

Here’s why this matters beyond one small fund: when a single AI ETF can post a 39% gain while crypto benchmarks slide double digits, fund managers and allocators face pressure to justify holding bitcoin exposure at all, especially in a product as thinly traded as DEFI. It’s a competitive dynamic that smaller, later-to-market crypto funds are poorly positioned to survive.

Broader U.S. spot bitcoin ETF market context

Yet DEFI’s struggles don’t necessarily signal trouble for the category as a whole. The broader U.S. spot bitcoin ETF market still holds $77.6 billion in net assets and has attracted a cumulative $51.5 billion in net inflows since launch. Most of that capital has concentrated in a handful of dominant products: IBIT alone accounts for roughly $60.5 billion of lifetime inflows, while Fidelity’s FBTC has drawn about $9.95 billion. Grayscale’s GBTC, which converted from an existing trust into a spot ETF, has instead seen $27.47 billion in outflows — a reminder that within this market, winners and losers can look very different depending on when and how a fund launched.

Spot crypto ETF closures aren’t unprecedented globally, either. In November 2022, Cosmos Asset Management withdrew its Australia-listed bitcoin and ether ETFs after they attracted only about 1.1 million Australian dollars combined — a far smaller failure, but one that followed a similar pattern of a niche fund unable to gain traction against better-capitalized rivals.

Hashdex’s Continuing Role in U.S. Crypto ETFs

Hashdex isn’t exiting the U.S. crypto ETF business. The company continues to oversee in excess of $200 million through its other U.S.-accessible offerings, such as the Hashdex Nasdaq Crypto Index US ETF (NCIQ), which provides diversified exposure). That suggests the DEFI closure reflects a targeted product decision rather than a broader retreat from the American market. CoinDesk reported it had reached out to Hashdex for comment on the closure.

Other Hashdex products and market presence

The distinction matters for anyone watching whether more crypto ETF closures could follow. Hashdex trimming a single underperforming, late-to-market fund while keeping diversified products running looks less like a signal of fading confidence in crypto ETFs generally and more like standard portfolio housekeeping — the kind every asset manager does when a product simply never finds its audience.

Still, the episode underscores a real competitive squeeze facing smaller entrants in the spot bitcoin ETF space. With inflows concentrated so heavily among a few large issuers and investor attention increasingly captured by AI-related funds, any fund that launched late, without a fee advantage, and without scale may find it hard to justify its own existence going forward.