Franklin Templeton’s DRIP model undercuts BlackRock’s IBIT

The mechanics of the DRIP funds

Franklin Templeton’s DRIP funds automate bitcoin accumulation using stock dividends. The Franklin US Equity Bitcoin DRIP Index ETF and the Franklin US Innovation Bitcoin DRIP Index ETF each allocate 95% to U.S. equities and 5% to bitcoin. The US Equity version tracks the VettaFi US Large-Cap 500 Bitcoin DRIP Index, which covers 498 securities with market caps between $7.5 billion and $4.9 trillion. The US Innovation version tracks the VettaFi US Innovation 100 Bitcoin DRIP Index, targeting 100 large non-financial Nasdaq companies. Instead of distributing cash, the funds buy bitcoin-linked instruments such as spot bitcoin ETPs, futures, or options. In some cases, the funds use a wholly-owned subsidiary in the Cayman Islands. The structure creates a 5% bitcoin feed from equity dividends. All dividends reinvest in bitcoin-related securities at the market open the day following the dividend ex-date. Quarterly rebalancing trims the bitcoin allocation back to 4.5% if it exceeds 5%. The portfolio maintains a 20% cap on bitcoin exposure between these rebalancing periods.

Breaking down the fee advantage

The 0.15% expense ratio for these DRIP models undercuts BlackRock’s IBIT, which charges 0.25%. IBIT controls 77% of all spot bitcoin ETF assets, totaling $70.6 billion. BlackRock’s IBIT accumulated $62.88 billion in net inflows since January 2024, and its daily volume often exceeds the combined volume of all other funds. Most other funds charge between 0.19% and 0.25%, though Franklin Templeton’s EZBC fund charges 0.19%. The Grayscale Bitcoin Mini Trust carries a 0.15% fee after its July 31, 2024 launch, using roughly 10% of GBTC’s holdings. VanEck’s HODL fee of 0.20% expired on July 31, 2026.

While IBIT attracts institutional investors with its massive liquidity and tight spreads, these new Franklin Templeton funds target investors who want to build a bitcoin position using the cash flows from their existing large-cap equity holdings. I find the 0.15% fee a strong move against the 0.25% leaders.

Market volatility and custody

Bitcoin trades below $62,700, which is a drop from the October 2025 peak of $126,000. This volatility, seen when Bitcoin fell below $61,000 in February 2026, makes automated accumulation strategies attractive. However, investors face counterparty risk and custody concentration. Ten of the twelve spot bitcoin ETFs use Coinbase or its affiliates for custody, though Fidelity’s FBFB uses Fidelity Digital Assets instead.

In February 2026, Bitcoin fell below $61,000 in a single session, dropping more than 45% from its all-time high. This stress test highlights the risks of market volatility. Direct ownership provides control over private keys and on-chain transactions, functions that these ETFs do not support. ETF holders cannot use bitcoin for dollar-denominated payments or use it in layer 2 protocols. You manage your own seed phrases and use bitcoin directly with self-custody. Can the DRIP model’s 5% allocation provide enough upside to offset the 95% equity weight during a massive bitcoin bull run?