Public anticipation mounts for the U.S. Securities and Exchange Commission's decision on spot Bitcoin ETF applications as the deadline looms. Applicants filed their final S-1 form amendments on January 8, scrambling to lower fees and heightening competition among offerings.
In the currently filed ETFs, Bitwise offers the lowest sponsor fee. It proposes no fee for the first six months or the initial $1 billion in assets, followed by a 0.24 percent fee. ARK Invest and 21Shares adopt a similar strategy, with no initial fees for the same period or up to $1 billion in assets. They will then implement a 0.25 percent fee.
BlackRock's iShares Bitcoin Trust will introduce a 0.20 percent fee for the first 12 months before hiking it up to 0.30 percent. The proposed fee is much lower than the industry expected, making the competition more difficult.
Meanwhile, VanEck lists a 0.25 percent fee, smaller than Franklin's 0.29 percent and Fidelity's 0.39 percent.
On the higher end, Wisdomtree offers a 0.5 percent fee, while Galaxy Invesco offers six months with no fee followed by 0.59 percent.
Valkyrie proposes 0.80 percent, and Hashdex sets a sponsor fee of 0.90 percent. Grayscale decreased its fee from two percent to 1.5 percent, making it the priceiest among the applicants.
Fees are usually among the last aspects finalized before an ETF launch. The SEC is expected to greenlight spot Bitcoin ETFs this week, marking a pivotal moment for an industry that has been trying to introduce this product to the market for a decade
"This is unprecedented," said Todd Rosenbluth, head of research at VettaFi, a data analytics firm, as quoted by Reuters. "Having a real race right out of the gate in that context is going to be... dramatic and exciting."
The SEC has previously declined all spot bitcoin ETF applications, citing concerns regarding investor safety. Anticipation for approval heightened last year following a federal appeals court ruling that criticized the agency's rejection of Grayscale's proposal to transform its current Bitcoin Trust (GBTC), featuring a two percent fee, into a spot bitcoin ETF.
A major win for investors
Nate Geraci, president of The ETF Store, pointed out that investors are the primary beneficiaries of the latest proposed pricing structures.
A spot bitcoin ETF offers investors exposure to Bitcoin without having to directly possess the token, potentially attracting billions more in investment into the leading cryptocurrency. As of writing, Bitcoin is valued at $46,487.09.
“It’s still early to predict which product will gain investors’ favor, but I’d bet on BlackRock at this stage,” said Neena Mishra, director of ETF research at Zacks Investment Research, as quoted by Blockworks.
“What’s not to like about a low-cost product from the world’s largest asset manager that seems perfect for an advisor or investor looking for safe and convenient bitcoin exposure?”
According to Bryan Armour, an ETF analyst at Morningstar, fees are one of the most important aspects for investors. He believes "there is no reason" for investors to "pay more" for the same exposure.
However, James Angel, associate professor of finance at Georgetown University's business school, said that short-term speculators will pay more attention to liquidity than fees.
Bloomberg market analyst Eric Balchunas suggested that these fee cuts might prompt cryptocurrency exchanges to cut their fees before it's too late. He also added that temporary fee waivers haven't significantly affected long-term investors, as they focus on longer-term fees.
Still, he noted the fee waivers might be crucial this time, as all the proposed ETFs do the same thing.