In an updated S-3 form, Grayscale has reduced its management fee from 2% to 1.5% as part of the proposed conversion of its Bitcoin Trust into a spot ETF.
Experts compared this with offerings from other potential issuers of similar products. Bloomberg analyst James Seyffart noted that the lowest rate of 0.24% was proposed by Bitwise. This is followed by VanEck at 0.25%, although the firm also plans a zero fee for the first 3-6 months. BlackRock will charge 0.2% initially, with a subsequent increase to 0.3%.
WOW: This morning was wild for #Bitcoin ETF filers. Here’s the state of play on the fee war front. Lowest long term fee is @BitwiseInvest at 0.24% followed closely by @vaneck_us at 0.25%. But we also have fee waivers on 3 for 6 months down to 0.0%. Plus BlackRock waiver to 0.20% pic.twitter.com/8bfhtFHOfH
— James Seyffart (@JSeyff) January 8, 2024
Eric Balchunas, Seyffart’s colleague, described Grayscale’s decision as a “Terrordome-style challenge”—a reference to a fighting video game featuring horror film characters. He remarked that such an approach “usually doesn’t work out well.”
Wow, Grayscale totally defying Terrordome (which they are not natives of) which usually doesn’t work out well but maybe they can afford to given their massive embedded aum and volume. Hard to imagine advisor (where the big money is) picking a 1.5% ETF when others sub 40bps. https://t.co/T60yz3hlXh
— Eric Balchunas (@EricBalchunas) January 8, 2024
“Perhaps they can afford it, given their already massive AUM and volume. But it’s hard to imagine an advisor (where the big money is) choosing a 1.5% ETF when others trade below 0.4%,” the expert added.
At the time of writing, the assets of the Grayscale Bitcoin Trust exceed $27.2 billion. The trust holds over 622,600 BTC, accounting for about 3% of the total issuance of the first cryptocurrency.
Grayscale CEO Michael Sonnenshein told CoinDesk that the firm set the fee based on research of existing similar products, including futures, worldwide.
“It’s no surprise that all new issuers entering the market here in the US are engaging in a fee race. They all start from scratch and hope to attract assets from investors,” he commented.
The company also announced Jane Street, Virtu, Macquarie Capital, and ABN AMRO Clearing as authorized participants for the future exchange-traded bitcoin fund.
Earlier in January, Seyffart noted that all potential issuers of ETFs based on the spot price of digital gold had submitted final amendments to the SEC. According to the analyst, this puts them on the “home stretch” towards product approval.