By
Godfrey Benjamin
April 29th, 2024
Charles Schwab has demonstrated an increasing interest in the crypto space following initial skepticism towards the emerging economy.
Analysts predict that Charles Schwab, a multi-trillion dollar asset manager, is on the cusp of making a strategic entry into the competitive realm of Bitcoin spot exchange-traded funds (ETFs).
While industry giants like Fidelity and BlackRock engage in a fierce rivalry for dominance, Schwab has taken a measured approach, allowing its customers access to all the approved spot Bitcoin ETFs without rushing to create their own proprietary offerings.
Nonetheless, analysts speculate that this conservative stance might shift, with Schwab potentially entering the ETF competition in the near future.
Shock the World
Eric Balchunas, a seasoned senior ETF analyst at Bloomberg, said in an interview with RIABiz that Schwab’s patient approach may position it to offer a product with lower fees than its competitors. The move could reshape industry dynamics with its large-scale customers.
“They may shock the world and offer something that is 10 basis points in a few months. I wouldn’t be surprised. They could have something up their sleeve. They might like to do something like that,” said Balchunas.
Balchunas said one of the major differences between the existing Bitcoin ETFs is pricing, and the company could capitalize on that to launch a lower-cost product offering.
The analyst cited an example of Grayscale, which currently operates an ETF with a substantial 150-basis-points fee.
Balchunas said the company faces challenges witnessing outflows amounting to billions of dollars within the initial weeks of trading. In contrast, Fidelity’s Bitcoin ETF, with a modest 25-basis-points fee, is experiencing considerable inflows, accumulating billions of dollars.
“This is what happens with a high-cost alternative. It’s a good time to launch. You’ve got this pool of assets just sitting there and they’ll pick them off. It’s like a wounded deer and a bunch of wolves,” Balchunas said.
Nate Geraci, president of the ETF Store, shares the same sentiment, confidently asserting that it’s not a matter of if but when Charles Schwab will launch a Bitcoin ETF. Geraci aligned with Balchunas, predicting that Schwab might shock the world and offer something less than what competitors currently charge for transaction fees.
“In a market where rivals charge higher fees, such a move could resonate positively with a diverse investor base,” he said.
Leaving Money on the Table
Another industry expert, Ari Sonnenberg, a partner at Wagner Law Group, said the company knows it’s leaving money on the table by not joining the ETF race and creating its own investment vehicle.
“Schwab also knows that they are leaving money on the table, at least at the moment, by not having their own. Schwab seems to be satisfied making money off other ETFs.”
The legal expert said the company’s delay in launching a spot Bitcoin ETF was consistent with its regular approach to introducing products to the market. Sonneberg said the firm is more “methodical with its approach to product development” compared to other asset managers.
“They trade the first-mover advantage to have a more thoughtful lineup that can stick with them for the long term,” he said.
A Change of Heart
Meanwhile, Charles Schwab has demonstrated an increasing interest in the crypto space following initial skepticism towards the emerging economy.
Unlike its competitor Vanguard, which blocked investors’ access to the newly launched Bitcoin ETFs, Schwab immediately added the products to its platform after its approval on January 10. Before the approval, the $8.5 trillion asset manager had limited its users to access only a Grayscale closed-end fund.
Schwab has also actively supported the EDX Markets exchange, which commenced operations in June 2023, alongside industry heavyweights like Fidelity and Citadel Securities. Further showcasing its adaptability, Schwab offers an ETF investing in crypto-related companies like Coinbase, Microstrategy, and Riot Platforms.