Spot Bitcoin ETF Issuers Initiate A Battle Approval Deadline

On January 8, several investment managers revealed the fees they intend to charge for their proposed spot bitcoin exchange-traded funds (ETFs), marking another milestone in their quest for approval from the U.S. securities regulator this week.

BlackRock (BLK.N), VanEck, Ark Investments/21Shares, and Bitwise, among others, submitted filings to the Securities and Exchange Commission (SEC) stating that they anticipate offering fees well below the average market rate for U.S. ETFs as they compete for market share ahead of the SEC’s approval deadline on Wednesday.

Bitwise emerged as the frontrunner with the lowest fee at 0.24%, compared to the average of 0.54% for U.S. ETF products, as reported by Morningstar. VanEck followed closely behind at 0.25%. Ark and 21Shares reduced their planned fee from 0.80% to 0.25%, while BlackRock announced a fee of 0.30%.

Typically, fees are one of the final details to be determined before an ETF launch. Market participants are optimistic that the SEC will grant approval for the spot bitcoin ETFs this week, marking a significant milestone for an industry that has been striving for a decade to bring this product to market.

“This is unprecedented,” remarked Todd Rosenbluth, head of research at VettaFi, a data analytics firm. “Having a real race right out of the gate in that context is going to be… dramatic and exciting.

” Previously, the SEC had rejected all spot bitcoin ETFs due to concerns about investor protection. However, hopes for approval surged last year after a federal appeals court ruled that the agency was mistaken in rejecting Grayscale’s application to convert its existing Bitcoin Trust (GBTC), which charges a 2% fee, into a spot bitcoin ETF.

Grayscale announced on Monday that it would charge a fee of 1.5% for its proposed ETF, the highest among the fees disclosed thus far.

Grayscale CEO Michael Sonnenshein expressed satisfaction with the frequent communication between the company and the SEC in recent months regarding the product. “It’s been very encouraging to work together to pave the way for these products to come to market,” he stated in an interview with Reuters.

The race to launch a spot bitcoin ETF has ignited competition among various players in the industry.

Grayscale Investments and traditional finance giants like BlackRock and Fidelity are competing in the race to launch a spot bitcoin ETF. Bryan Armour, an ETF analyst at Morningstar, emphasizes that fees are a crucial factor for long-term investors, as there is no justification for paying more for the same exposure.

James Angel, an associate professor of finance at Georgetown University, highlights that liquidity holds greater importance for short-term speculators. The potential inflow of money into spot bitcoin ETFs remains uncertain, with estimates ranging from $3 billion on the first day to $55 billion over five years. Standard Chartered predicts inflows of $50 billion to $100 billion in 2024 alone. The approval of a bitcoin ETF by the SEC would boost confidence in the crypto industry, which faced setbacks due to the FTX meltdown and other collapses. Such an ETF would allow investors to gain exposure to bitcoin without directly holding it, attracting billions of dollars into the largest cryptocurrency.

However, critics, including the Washington advocacy group Better Markets, argue that the crypto market is rife with fraud and warn against approving the product. SEC Chair Gary Gensler also cautions about the exceptional risks and volatility associated with crypto investments, highlighting instances of insolvency among crypto platforms and assets.