In a strategic bid to dominate the emerging spot Bitcoin ETF market, financial giants like Blackrock and Invesco/Galaxy unveil aggressive fee cuts, while Bitwise takes an innovative philanthropic approach.
Spot Bitcoin ETFs Gear Up for Fierce Competition With Low Fees, Teaser Rates, and More
Leading up to the SEC approval deadline, spot Bitcoin ETFs, including industry giants Blackrock and Fidelity, began disclosing competitive fee structures, signaling the intensifying race to attract investors.
Blackrock said in its Jan. 8 S-1 filing that it will start with a 0.2% fee for its initial $5 billion assets in the first year, rising to 0.3% thereafter. In contrast, Fidelity opted for a slightly higher fee of 0.39%. Bitwise, which first filed for a spot bitcoin ETF five years ago, has the lowest normal fee among the current group of ETFs at 0.24%. Others are pushing the envelope with extreme teaser rates.
Invesco/Galaxy announced a deal to charge 0% for the first $5 billion for six months, followed by a regular fee of 0.59%. Similarly, ARK and its custodian 21Shares is offering a 0% fee for the first six months or until it reaches $1 billion in assets, with its regular fee rising to 0.25%. These competitive rates are indicative of the sector’s high stakes, where early advantages could determine long-term market dominance.
Grayscale has taken a very different approach. Grayscale, converting its bitcoin trust (GBTC) into an ETF, disclosed a planned 1.5% annual fee, a reduction from its current 2% but still 100 basis points higher than its competitors. This positioning, which seems uncompetitive given the aggressive fee strategies of its rivals, appears to be relying on Grayscale’s volume and liquidity.
Experts in the field, such as Nate Geraci of The ETF Store and James Seyffart at Bloomberg, view these developments as a victory for investors. Geraci, President of The ETF Store, highlighted the benefits for investors with fees below the 40 basis points threshold. In an X post, Seyffart exclaimed:
Honestly. These fees are sooo low and the ETFs will trade ABSURDLY tight (penny wide bid-ask spreads) and without any commissions on most platforms. Don’t be surprised when the fee war leaks out beyond just the ETFs
While most ETFs have thus far focused solely on fee competition, Bitwise is doing something to distinguish itself. While their ETF boasts the lowest normal fee, their newest strategy involves announcing they will contribute 10% of the Bitwise Bitcoin ETF’s profits to support Bitcoin open-source development. Beneficiaries include Brink, Opensats, and the Human Rights Foundation.
Bitwise will donate 10% of the profits of the Bitwise Bitcoin ETF (ticker: BITB) to bitcoin open-source development.
Recipient orgs:
– @BitcoinBrink
– @OpenSats
– @HRFBitcoin is important to the future. We’re excited for $BITB to support its foundation
pic.twitter.com/JMzd4bMOB9
— Bitwise (@BitwiseInvest) January 10, 2024
Bitwise’s strategy will likely appeal to people who care about bitcoin as an important new asset, but it seems less effective at attracting speculators. It will be interesting to see if a substantive number of investors in traditional finance are persuaded by this, or if they will overwhelmingly seek out more familiar names, such as Blackrock and Fidelity.
If you were to invest in one of these ETFs, would Bitwise’s pledge to bitcoin open-source development persuade you to invest with them? Share your thoughts and opinions about this subject in the comments section below.
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