Key Points
- The SEC is expected to approve the first spot bitcoin exchange-traded fund (ETF) this week.
- The world’s top cryptocurrency by market capitalization, which would be traded in the new ETFs, increased more than 100% in 2023, and analysts predict significant bitcoin investment inflows in 2024.
- As competition heats up, ETF providers are sharing proposed fee structures for these new bitcoin instruments, with some waiving or offering lower-than-usual fees.
The widely anticipated introduction of a spot bitcoin exchange-traded fund (ETF) has fueled competition among providers, with some suspending fees until they show robust investor uptake.
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BlackRock (BLK), VanEck, ARK Investment Management LLC, and Bitwise Asset Management Inc. are among the firms looking to establish a spot bitcoin ETF, and their recent Securities and Exchange Commission (SEC) filings suggest that they plan to undercut the average market rate for ETF investor fees in the United States.
Bitwise lowered the bar by announcing a planned 0.20% management fee for its spot bitcoin ETF, compared to the 0.37% average for existing U.S. ETF products and mutual funds in 2022, according to Morningstar Inc. investment research. Given that all ETFs track bitcoin, the fees they charge may help investors distinguish them.
Bitwise is followed by VanEck and ARK Invest’s 21Shares, both of which plan to charge 0.25% ETF expense fees, while BlackRock plans to charge 0.30%. After submitting its bitcoin ETF proposal last year, BlackRock fueled a rise in bitcoin prices.
The adoption of a Bitcoin spot ETF by institutional and retail investors is something that cryptocurrency enthusiasts are anticipating would happen. Once an ETF is established, investment bank Standard Chartered said in a research note on Monday that it anticipates investment flows of $50 billion to $100 billion in 2024 alone.
ETF providers are eager for potential investment inflows and have ratcheted up the fee arms race with waiver periods. Bitwise stated that it would waive fees for new spot bitcoin ETFs for the first $1 billion invested in the fund’s first six months, whereas BlackRock set a 12-month waiver period or the first $5 billion invested. The 21Shares Bitcoin ETF, launched in collaboration with ARK Invest, offers a six-month waiver for the first $1 billion invested, followed by a 0.25% fee (SEC). “ARK 21 Shares Bitcoin ETF S-1/A.”
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