Trillion-dollar asset managers are eyeing approval for their Bitcoin (BTC) ETF products within days, and all are competing to seize market share at the opening bell.
One major area of competition relates to management fees – the annual cost imposed by funds to handle the BTC backing their client’s shares. Though many have disclosed their planned fee structures in recent regulatory filings, the largest players within the race are curiously keeping their rates under wraps.
“One of the biggest unknowns left in this saga is what BlackRock’s fee will be on the bitcoin ETF,” wrote Bloomberg ETF analyst Eric Balchunas to X (formerly Twitter) on Tuesday.
Grayscale, he noted, also left mention of a fee absent from its updated S-3 filing the same day. Until today, its massive Grayscale Bitcoin Trust (GBTC) which boasts over 619,000 BTC ($26 billion) has charged a 2.00% fee on client assets, which investors starved of BTC-linked alternatives have frequently criticized as exploitative.
Grayscale CEO Michael Sonnhenshein has repeatedly promised to lower fees once conversion into an ETF is confirmed, but whether the fund can go lower than rivals remains a mystery. Last month, Ark Invest unveiled a management fee of 0.8% for its Bitcoin ETF, beating both Grayscale and the ProShares Bitcoin Strategy ETF (BITO), which charges a 0.95% fee.
Here’s a view of the Cointucky Derby starting gate as of this morning. We’re focused on these 11 spot #Bitcoin ETF filers. Expecting most of these N/A’s to be filled over the next ~week.
Still looking for potential approval orders in that Jan 8 to Jan 10 window. pic.twitter.com/HYdnPuiaRx
— James Seyffart (@JSeyff) January 2, 2024
How Low Can ETF Sponsors Go?
In its Friday S-1 update, Valkyrie unveiled a matching 80 basis point fee. Fidelity, however, revealed an even lower 0.39% sponsor fee that same day, making it the lowest so far in the ETF race.
Galaxy and Invesco may have an even more enticing offer: though its standard sponsor fee is 0.59%, its latest filing promised zero fees for its first six months of activity, as well as on its first $5 billion in assets.
The move will help entice initial capital from investors in what is largely viewed as a winner-take-all race to become the leading U.S. fund for gaining spot Bitcoin exposure. Unlike the first wave of Bitcoin futures ETFs in 2021, experts expect this year’s many approvals to be simultaneous, creating more room for competition.
That just leaves BlackRock – the asset manager that inspired optimism for most applicants to try their hand upon filing with regulators for an ETF in June.
Balchunas predicted that the fund will target a 0.47% fee, which it could “get away” as long as it continues facing no competition from Vanguard.
“Undercutting Fidelity makes sense, could def happen, but they’ll also want to milk it because no Vanguard,” he added.
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