Spot Bitcoin ETF Applicants Compete with Low Fees
Applicants for spot bitcoin ETFs are engaged in a race to the bottom with their fee schedules as they seek to gain market share. Several applicants, including BlackRock, Fidelity, and VanEck, have filed amended S-1 forms revealing their proposed fees. Bitwise is leading the pack with zero fees for the first six months or until $1 billion in assets are reached. Ark/21Shares is close behind with zero fees for the same period, followed by BlackRock at 0.2% for the first 12 months or until $5 billion in assets. Other issuers have higher fees, such as Valkyrie at 0.8% and Hashdex at 0.9%. Grayscale has lowered its fees from 2% to 1.5%.
Why Are Fees So Low?
The low fees offered by potential spot bitcoin ETF issuers are aimed at gaining market share in the early stages of launch. This competition is based on the belief that early momentum can carry through and that there is a significant market demand for these products. For example, VanEck estimates $1 billion in inflows within the first few days and $2.4 billion within a quarter for spot bitcoin ETFs. Galaxy predicts inflows of $14 billion within the first year, while Bitwise anticipates a market size of $72 billion within five years.
Final Approval and Competition
With fee schedules largely sorted out, it now falls on the SEC to decide whether to approve the necessary forms for spot bitcoin ETFs. Once approved, trading can begin the following day, marking the start of intense competition for market share among these ETFs.
Hot Take: Spot Bitcoin ETFs Engage in Fee War
Applicants for spot bitcoin ETFs are engaging in a fee war as they compete for market share. With fees as low as zero for the first few months or until certain asset thresholds are reached, these ETFs are aiming to attract investors and gain momentum early on. The potential market for spot bitcoin ETFs is significant, with estimates of billions of dollars in inflows within the first year. The approval and launch of these ETFs will mark the beginning of intense competition among issuers, as they strive to establish themselves in this growing market.
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