Bitcoin ETF Applicants Slash Fees in Competition for SEC Approval
As the race for the first spot bitcoin exchange-traded fund (ETF) intensifies, several applicants have been slashing their fees in an attempt to gain a competitive edge. BlackRock, the world’s largest asset manager, reduced its sponsor fee for its potential bitcoin ETF from 0.3% to 0.25%. It also lowered its temporary discount from 0.2% to 0.12% for the first $5 billion of assets in the first 12 months from launch. Other applicants, including Ark Invest/21Shares, Fidelity, Valkyrie, and WisdomTree, have also reduced their fees. The move comes as the anticipated approval from the Securities and Exchange Commission (SEC) draws closer.
BlackRock, Ark Invest, and Others Reduce Fees for Potential Bitcoin ETFs
BlackRock’s fee reduction is believed to be in response to the growing competition in the space. Ark Invest/21Shares also cut its fee from 0.25% to 0.21% and is maintaining zero fees for the first six months or until $1 billion in assets. Other applicants, such as Fidelity, Valkyrie, Invesco Galaxy, and WisdomTree, also followed suit by reducing their fees. Bitwise remains the cheapest potential issuer with a permanent fee of 0.2%. Grayscale, which is seeking to convert its existing GBTC product into an ETF, lowered its fee from 2% to 1.5%, despite its much higher fees compared to the competition.
Popular Traditional ETFs Still Cheaper Than Proposed Bitcoin ETFs
While the fees for spot bitcoin ETFs are lower than expected, they are still higher compared to popular traditional ETFs. The SPDR S&P 500 ETF Trust (SPY), the first modern ETF, has a fee of 0.09%, making it cheaper than all proposed spot bitcoin ETFs. Other S&P 500 products, such as iShares Core S&P 500 ETF and Vanguard S&P 500 ETF, offer even cheaper fees at 0.03%. In terms of the broader stock market, the Vanguard Total Stock Market ETF and the Schwab U.S. Broad Market ETF also offer fees of 0.03%. In the bond market, fees for the iShares Core U.S. Aggregate Bond ETF and the Vanguard Total Bond Market ETF are also at 0.03%. Despite being more expensive than equity and bond ETFs, spot bitcoin ETF fees fare better when compared to commodity ETFs.
Spot Bitcoin ETF Fees Compared to Equity, Bond, and Commodity ETFs
The proposed spot bitcoin ETF fees, although higher than traditional ETFs, look more favorable when compared to commodity ETFs. The SPDR Gold Shares (GLD), the largest gold ETF, has a fee of 0.4%, while the iShares Gold Trust (IAU) is cheaper at 0.25%. In terms of other precious metal ETFs, fees for the iShares Silver Trust (SLV) are more expensive at 0.5%. Existing fees for U.S. bitcoin futures ETFs are even higher, with the ProShares Bitcoin Strategy ETF and the VanEck Bitcoin Strategy ETF charging fees of 0.95% and 0.76%, respectively.
SEC Decision to Determine Start of Trading for Spot Bitcoin ETFs
The SEC’s upcoming decision on the 19b-4 and S-1 forms will determine when the proposed spot bitcoin ETFs can start trading. If approved, trading could begin as soon as the day after approval. Valkyrie and VanEck, two of the applicants, have indicated that they expect their ETFs to start trading on Thursday. The reduced fees from many of the prospective issuers reflect the belief that being the first to gain momentum could lead to significant inflows and market dominance.
Analyst comment
Positive news: The reduction in fees by multiple Bitcoin ETF applicants shows growing competition and a push to gain a competitive edge, indicating optimism in the market. This could lead to increased adoption and liquidity, driving the growth of the Bitcoin ETF market.
