By
Chimamanda U. Martha
April 26th, 2024
The majority of US spot Bitcoin ETF issuers have set their sponsor fee between 0.19% and 0.25%, but the high competition could easily cause further lowering in the near term.
The heightened demand for the spot Bitcoin (BTC) exchange-traded funds (ETFs) in the United States has compelled the issuers to lower fees dramatically to remain competitive. Apart from Grayscale Investments’ GBTC, which has fees of more than 1 percent, the rest of the US spot Bitcoin ETF issuers have been engaging in sponsor-fee wars. Moreover, wealth managers have a wide variety of issuers to choose from, with deep liquidity being a non-issue.
VanEck Further Drops Spot Bitcoin ETF Fees
According to a supplementary filing dated February 15, VanEck Bitcoin Trust (HODL) will effectively lower its operating fees from 0.25 percent to 0.20 percent on February 21. The company’s HODL, which has around $187.74 million in total assets under management, is expected to become more competitive after lowering its operating costs on Wednesday next week. Moreover, wealth managers are keen on minimizing operating expenses to maximize gains for their respective clients.
“This fee reduction reflects our commitment to provide value and improve access to investors, and helps ensure investors continue to benefit from one of the most competitive offerings in the bitcoin ETF space,” a VanEck spokesperson noted.
Fee Wars on the Rise
The Grayscale Bitcoin Trust (GBTC) has been the only spot Bitcoin issuer with static and high operational costs of more than 1 percent. As a result, Grayscale’s GBTC has recorded notable daily cash outflows since the approval of the spot Bitcoin ETFs last month. Meanwhile, other fund managers have been involved in fee wars even before the approval of the spot Bitcoin ETFs.
Interestingly, the few wars in the United States have spilled over to other jurisdictions, including Europe-based fund managers, whereby they have been compelled to lower to remain competitive. Earlier this week, the Fidelity Physical Bitcoin ETP (FBTC) announced that it had lowered its operating cost from 0.75 percent to 0.35 percent.
Last month, Invesco Galaxy Bitcoin ETF (BTCO) and the WisdomTree Bitcoin Fund (BTCW) reduced their fees to 0.39 percent and 0.35 percent, respectively. Similarly, CoinShares fund managers reduced its spot Bitcoin ETF fees to 0.35 percent.
Market Outlook and Implications
The heightened fee wars in the spot Bitcoin ETF are an indication of the heightened BTC demand from institutional investors. As a result, market experts believe Bitcoin price could easily reach a new all-time high (ATH) before the upcoming halving. Moreover, the daily Bitcoin demand from the spot BTC ETF issuers has in the recent past outweighed the miners’ daily supply. Therefore implying the demand against supply shock will be significantly exaggerated after the upcoming halving.
