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Bitcoin ETF Filings Show Suspiciously Low Fees as Cryptocurrency Price Wars Escalate
The flurry of amendments to S-1 filings for Bitcoin ETFs has seen fee proposals drop dramatically. ARK Invest, BlackRock, and VanEck have all reduced their fees to under 0.4%, with BlackRock waiving a portion of its charges for the first 12 months.
ARK Invest is charging a fee of 0.25% of the client’s Bitcoin holdings, Grayscale dropped its fee from 2% to 1.5%, and BlackRock is charging 0.3%. Bitwise Asset Management and VanEck tabled the lowest long-term annual fees of 0.24% and 0.25%.
Low Cryptocurrency ETF Fees Might Be Risky
According to the CEO of Custodia Bank, Caitlin Long, low fees could be masking risky securities lending. In such transactions, a third party pays the owners of shares and bonds a borrowing fee and collateral in exchange for temporary possession of a security.
“When fees are lower than costs, please please please ask yourself how the asset manager is making money managing the fund. With no-fee funds, the answer is usually securities lending—a practice that can pose a lot of hidden risk to investors. What‘s really going on here?”
Long is a proponent of crypto self-custody. She pioneered laws defining crypto possession in Wyoming.
However, the fee competition will likely drive volumes into the crypto space and feed institutional demand. Crypto influencer Lark Davis believes the low fees will catapult Bitcoin’s price.
“A wave of capital will flow into Bitcoin. Most likely starting this week.”
Read more: How To Prepare for a Bitcoin ETF: A Step-by-Step Approach
Cryptocurrency ETF Price War Has Winners
Notable industry players like Grayscale CEO Michael Sonnenshein expect the SEC to approve multiple exchange-traded funds (ETF) simultaneously. The competition will likely benefit institutional investors, who, up to this point, had to pay high fees to get access to Grayscale’s Bitcoin Trust.
Some commentators on X have remarked that the ETF fees are lower than Coinbase’s retail fees. As a result, the exchange may need to consider reductions to compete with exchange-traded products.
However, exchanges like Coinbase mostly serve a different customer base. The company’s popularity during the pandemic proved a healthy retail appetite for crypto.
ETFs, however, are more geared towards institutional investors looking for, as Michael Saylor puts it, a regulated “high-bandwidth” channel for investment. Retail crypto trading, which still occupies a legally murky area in the US, does not satisfy that criteria.
Coinbase could still benefit from a possible ETF boom, as its crypto custody business is cited in several ETF filings. This listing means it will take some of the fees that issuers charge clients.
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