Several spot Bitcoin ETF applicants have recently been receiving fee cuts as competition intensifies ahead of expected approval from the Securities and Exchange Commission.
BlackRock cut sponsor fees for potential spot Bitcoin ETFs from 0.3% to 0.25% in response to increased competition. It also reduced its temporary discount on the first $5 billion of assets from 0.2% to 0.12% for the first 12 months after launch, according to BlackRock’s recently revised Form S-1.
Ark Invest/21Shares is also reducing its fees from 0.25% to 0.21% under its latest S-1 form and keeping fees at zero for the first six months or up to $1 billion in assets.
Yesterday, several other applicants cut their fees after a clearer picture of competing costs began to emerge on Monday, sparking a race to the bottom given the significant potential market for their products.
Fidelity reduced its perpetual fees from 0.39% to 0.25%, Valkyrie from 0.8% to 0.49%, Invesco Galaxy from 0.59% to 0.39%, and WisdomTree from 0.5% to 0.3%. Bitwise maintained its current position as the cheapest potential issuer by reducing its perpetual fees from 0.24% to 0.2%.
Grayscale also filed a revised Form S-3 as part of its plan to convert its existing GBTC product into an ETF, lowering fees from 2% to 1.5%. Grayscale’s fees are significantly higher than its competitors, but its $27 billion in assets under management puts it ahead of the curve. And considering taxes when switching to another fund can help you focus more on retaining existing customers rather than attracting new ones.
The fee cuts for many prospective issuers seem to be based on the idea that whoever gets the momentum first will get it done, with billions of dollars worth of potential inflows expected.
Fee comparison with popular traditional ETFs
Spot Bitcoin ETF fees may be lower than expected and not as profitable at first, but they are not as low as some of the traditional ETFs on the market, especially when compared to stock and bond ETFs.
Founded in 1993, the SPDR S&P 500 ETF Trust (SPY) was the first modern ETF and has more assets under management than any other ETF in the world, about $483 billion, according to financial data firm VettaFi.
SPY fees are 0.09% lower than all perpetual fees on the proposed spot Bitcoin ETF. Competing S&P 500 products such as the iShares Core S&P 500 ETF (IVV) and Vanguard S&P 500 ETF (VOO), which rank second and third by AUM, respectively, offer much lower fees of 0.03%.
For the broader stock market, the Vanguard Total Stock Market ETF (VTI) and Schwab US Broad Market ETF (SCHB) also offer a 0.03% fee. For investors who want to focus on small-cap stocks, the iShares Russell 2000 ETF (IWM) offers a 0.19% fee, close to the proposed spot Bitcoin ETF. However, the Vanguard Small-Cap ETF (VB) comes in much cheaper at 0.05%.
In the bond market, the fees for iShares Core US Aggregate Bond ETF (AGG) and Vanguard Total Bond Market ETF (BND) are again 0.03%. Emerging Markets ETFs are more expensive, but still cheaper than all spot Bitcoin ETFs. The Vanguard FTSE Emerging Markets ETF is at 0.08% and the iShares Core MSCI Emerging Markets ETF is at 0.09%.
Bitcoin spot ETF fees are better than commodities.
The proposed spot Bitcoin ETF fees are more expensive than popular stock and bond ETFs, but appear to be more advantageous compared to top commodity ETFs.
SPDR Gold Shares (GLD), the largest gold ETF with $57.4 billion in AUM, has a 0.4% fee. However, iShares Gold Trust (IAU) is cheap at 0.25%, comparable to most competitive “digital gold” ETFs. As for other precious metals ETFs, the iShares Silver Trust (SLV) has a more expensive fee of 0.5%.
Comparing the existing fees for US Bitcoin futures ETFs, the proposed spot Bitcoin fees appear to be much more favorable. The most popular Bitcoin futures ETF, ProShares Bitcoin Strategy ETF (BITO), has AUM of $1.7 billion and fees of 0.95%. The VanEck Bitcoin Strategy ETF (XBTF) is slightly cheaper at 0.76%.
The feasibility of commencing trading for the proposed spot Bitcoin ETF will be determined as soon as possible following approval, following the SEC’s upcoming decision on Forms 19b-4 and S-1. Yesterday, Valkyrie and VanEck said they expect the ETF to begin trading on Thursday.
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