- Of the 13 applicants expecting their Bitcoin spot ETF applications to be approved by the SEC, only six have publicly revealed their management fees, and Fidelity has emerged as the cheapest of the lot.
- ETF experts say that ETF management fees will become a major field of competition, and while they don’t have to be the cheapest to be the most attractive, they must be reasonable.
For months, the cryptocurrency market has been so excited about the potential approval of a Bitcoin spot ETF that issues like on-chain trading transparency and management fees have been sidelined. However, with the first approval expected in the coming week, these fundamental aspects are coming to the fore, and according to experts, they could be significant determinants of which ETF issuer blows the competition out of the water.
As CNF has reported severally, a Bitcoin spot ETF is imminent, with some insiders revealing that the SEC has revealed internally that it will give its nod to these long-awaited financial instruments. But now, as the excitement subsides, questions about the fundamentals of these ETFs are being asked, including the fees and transparency.
According to James Seyffart, an ETF expert at Bloomberg Intelligence, “fees will be critical.” In an interview with a crypto news outlet, he stated:
I don’t think the issuers have to offer the absolute lowest fee, but I do think they can’t be charging too much more and still remain competitive.
In the exchange-traded products world, the fees pay for expenses such as custodial costs, salaries, and the market expenses of buying and selling securities. They are usually lower than for actively managed funds. BlackRock, for instance, charges an average of 0.30% in expense ratio, with the industry average around 0.24%.
The Bitcoin ETF Race Heats Up
The Bitcoin ETF issuers have been competing on fees in the lead-up to the first approval. Galaxy Digital and Invesco came out swinging from the start, revealing they would not charge any fees for the first six months and for the first $5 billion in assets under management for their respective ETFs. After this period, they will charge 0.59% in management fees.
Valkyrie and Ark and 21Shares joint ETF will charge 0.80%. By far, the lowest fees will be by investment giant Fidelity, which will only demand 0.39% in fees.
According to Seyffart, the low fees by Fidelity stem from being “more vertically integrated than anyone else here, which could allow them to offer the lowest fees.” This includes Fidelity’s in-house custody solution which allows them to save on the custodial fees.
Grayscale hasn’t revealed its fees. However, it currently charges 2% for its GBTC Bitcoin Trust, although it has publicly pledged to lower these charges once the ETF launches.
BlackRock hasn’t revealed its charges either, but according to market expert Nate Geraci, it will probably be lower than Fidelity.
Geraci, who is the president of ETF Store, an ETF consultancy, added:
From a purely competitive standpoint, the expense ratio matters *greatly* in this particular category. More so than marketing [in my opinion].
