Sanghamitra Saha
·4 min read
In a landmark decision, the U.S. Securities and Exchange Commission finally approved 11 Bitcoin ETFs last week. The long-awaited decision led to increased institutional and retail investor participation in the cryptocurrency market, driving massive inflows and price gains. About $4.6 billion was traded in new US spot Bitcoin ETFs on their first day of trading, per LSEG data (read: Bitcoin ETFs Make Historic Debut With $4.6B in Trading).
The approved ETFs are products from major financial players such as Grayscale Bitcoin Trust GBTC, BlackRock’s iShares Bitcoin Trust (IBIT), ARK 21Shares Bitcoin ETF (ARKB),Bitwise Bitcoin ETF (BITB),Invesco Galaxy Bitcoin ETF (BTCO),WisdomTree Bitcoin Fund (BTCW),VanEck Bitcoin Trust (HODL),Franklin Bitcoin ETF (EZBC),Fidelity Wise Origin Bitcoin Trust (FBTC),Valkyrie Bitcoin Fund (BRRR) andHashdex Bitcoin ETF (DEFI).
Among these, BITB charges 20 bps in fees followed by ARKB (with 21 bps in fees) while each of FBTC, BRRR, IBIT and HODL charges 25 bps in fees. The fund EZBC charges 29 bps in fees, BTCW and BTCO charge 30 bps and 39 bps in fees, respectively. The funds DEFI and GBTC charge 90 bps and 1.15%, respectively.
As far as fee waver is concerned, BITB and ARKB and BTCW’s fee will 0% for the fist six months for up to $1 billion in assets. The fund BTCO’s fee is 0% for first six months for up to $5 billion in assets. The FBTC will charge 0% through Jul 31, 2024. The fund BRRR charge 0% for the first three months. The fund IBIT charge 0.12% for first 12 months for up to $5 billion in assets and BTCO charge 0% for first six months for up to $5 billion in assets. There is no fee waiver for HODL, EZBC, DEFI and GBTC.
Expense Ratio Matters a Lot
Among the newcomers, efforts have been made to reduce expense ratios and offer fee waivers. For example, the Fidelity Wise Origin Bitcoin Fund initially proposed a 0.39% fee but later revised it down to 0.25% with a fee waiver in effect until July 2024. Valkyrie and ARK also lowered their ETF fees from 0.80% to 0.25% and 0.21%, respectively, while providing generous waivers for early investors. The competition among ETF issuers is likely to continue as they vie for market position.
In choosing a Bitcoin ETF, investors should consider that all of these ETFs essentially function in the same manner, with minor differences. Therefore, the expense ratio is a crucial factor in making a decision. The Bitwise and ARK 21Shares ETFs, with their 0.20% and 0.21% expense ratios, may be particularly appealing, especially since these fees are waived for the first six months.
Issuers’ Branding Is Another Crucial Factor
However, Fidelity and iShares by BlackRock, being renowned investment managers, should not be disregarded. They have a history of competitiveness with fees in traditional ETFs, and they may eventually offer more competitive rates than smaller competitors in the long run. Given the current minimal difference in fees between these funds and market leaders, it might make sense for investors planning long-term Bitcoin ETF holdings to consider these established options.
What About Funds With Higher Fees?
Hashdex Bitcoin ETF and Grayscale Bitcoin Trust, have been established for a significant period. Hashdex Bitcoin ETF is transitioning from a Bitcoin futures ETF to a spot Bitcoin ETF, while Grayscale Bitcoin Trust is transforming from a closed-end trust holding Bitcoin tokens to a spot Bitcoin ETF. They retain their existing assets under management, allowing them to maintain higher fees compared to new competitors seeking fresh investments.
Grayscale Bitcoin Trust (GBTC) became the most heavily traded ETF on its debut, with $2.3 billion in trading volume. This was followed by about $1 billion in iShares Bitcoin Trust (IBIT) and $685 million in Fidelity Wise Origin Bitcoin Trust (FBTC). ARK 21Shares Bitcoin ETF (ARKB) and Bitwise Bitcoin ETF (BITB) saw more than $278 million and about $122 million, respectively, in trading volume on the day.
Buying Bitcoin ETFs as a Cost-Effective Mean
Investors who wish to purchase Bitcoin in taxable accounts may find it more cost-effective to acquire the cryptocurrency directly from a cryptocurrency exchange, despite associated fees. However, this approach may take some time to offset the fees compared to the lowest-fee ETFs.
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Grayscale Bitcoin Trust ETF (GBTC): ETF Research Reports
