Multiple spot bitcoin ETF applicants have been slashing their fees in recent days as the competition intensifies ahead of anticipated approval from the Securities and Exchange Commission.
BlackRock dropped its sponsor fee for its potential spot bitcoin ETF from 0.3% to 0.25% in light of the growing competition. It also reduced its temporary discount from 0.2% to 0.12% for the first $5 billion of assets in the first 12 months from launch, according to BlackRock’s latest amended S-1 form.
Ark Invest/21Shares also cut its fee from 0.25% to 0.21% and is maintaining its zero fees for the first six months or until $1 billion in assets, per its latest S-1 form.
Yesterday, multiple other applicants slashed their fees after a clearer picture of the competition’s charges began to emerge on Monday, sparking a race to the bottom given the significant potential market for the products.
Fidelity reduced its permanent fee 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 permanent fee from 0.24% to 0.2%.
Grayscale also filed an amended S-3 form as part of its plan to convert its existing GBTC product into an ETF, lowering its fee from 2% to 1.5%. While Grayscale’s fees are far higher than the competition, its $27 billion assets under management give it a head start. And with tax considerations for switching to another fund, it may be banking on trying to maintain its existing customers more than attracting new ones.
The reduced fees of many prospective issuers are likely based on the idea that whoever picks up momentum first might carry it through, with billions of dollars worth of potential inflows anticipated.
Fee comparisons with popular traditional ETFs
While the spot bitcoin ETF fees are lower than expected, and may not be profitable initially, they are not as low as some of the top traditional ETFs on the market, especially compared to equity and bond ETFs.
Created 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 — some $483 billion, according to financial data firm VettaFi.
SPY fees are cheaper than all permanent fees for the proposed spot bitcoin ETFs at 0.09%. Competing S&P 500 products such as iShares Core S&P 500 ETF (IVV) and Vanguard S&P 500 ETF (VOO), second and third by AUM, respectively, offer even cheaper fees at 0.03%.
In terms of the broader stock market, the Vanguard Total Stock Market ETF (VTI) and the Schwab U.S. Broad Market ETF (SCHB) also offer fees of 0.03%. For investors wanting to focus on small-caps, the iShares Russell 2000 ETF (IWM) offers 0.19% — closer to the proposed spot bitcoin ETF fees. However, the Vanguard Small-Cap ETF (VB) comes out much cheaper at 0.05%.
In the bond market, fees for the iShares Core U.S. Aggregate Bond ETF (AGG) and the Vanguard Total Bond Market ETF (BND) again come out at 0.03%. Emerging market ETFs are more expensive but still cheaper than all spot bitcoin ETFs, with the Vanguard FTSE Emerging Markets ETF at 0.08% and the iShares Core MSCI Emerging Markets ETF at 0.09%.
Bitcoin spot ETF fees fare better against commodities
Despite the proposed spot bitcoin ETF fees being more expensive than popular equity and bond ETFs, they do look more favorable compared to top commodity ETFs.
SPDR Gold Shares (GLD), the largest gold ETF, with $57.4 billion AUM, has a 0.4% fee. However, the iShares Gold Trust (IAU) is cheaper at 0.25%, comparable to the most competitive “digital gold” ETFs. In terms of other precious metal ETFs, fees for the iShares Silver Trust (SLV) are more expensive at 0.5%.
Comparing existing fees for U.S. bitcoin futures ETFs, the proposed spot bitcoin fees look much more favorable. Fees for the most popular bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO), with $1.7 billion AUM, come in at 0.95%. The VanEck Bitcoin Strategy ETF (XBTF) is slightly cheaper at 0.76%.
The SEC’s upcoming decision about the 19b-4 and S-1 forms will determine the possible start of trading for the proposed spot bitcoin ETFs, potentially as soon as the day after approval. Yesterday, both Valkyrie and VanEck said they expect the ETFs to begin trading on Thursday.
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