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Competition is generally good for consumers, as per the prevailing conventional wisdom. For those who still doubt this paradigm, look no further than the price wars breaking across Wall Street over the imminent launch of spot Bitcoin ETFs.
Some of our readers might be confused by all of the brouhaha over the launch of these spot Bitcoin ETFs, and rightfully so. After all, futures-based ETFs of the world’s preeminent cryptocurrency already exist. However, Bitcoin’s futures-based ETFs do suffer from material underperformance due to the fact that the contracts for the months ahead are usually priced at a premium to the spot price in what is known as contango, leading to progressively expensive roll-overs as the front-month contract expires and the next one takes its place. Spot Bitcoin ETFs, on the other hand, sidestep this major bottleneck entirely, leading to elevated investment inflow expectations.
we peg it at $48tn for wealth managers in the US https://t.co/H9HXkRlELk pic.twitter.com/KN6G4JtoAu
— Alex Thorn (@intangiblecoins) January 7, 2024
Wealth managers in the US currently manage assets worth around $48 trillion. If just 1 percent of these assets are redeployed within the Bitcoin ecosystem courtesy of the upcoming spot ETFs, it would result in an investment inflow of nearly $500 billion! For context, Bitcoin’s entire market capitalization is just around $864 billion at the moment. What’s more, the amount of Bitcoin held within investment products, including ETPs and closed-end funds, stood at a measly $21.7 billion, as of the end of September 2023.
These numbers show the sizable scope of further investments within the Bitcoin ecosystem. It is hardly a surprise, therefore, that analysts appear to be tripping over each other in publishing a veritable litany of bullish targets for the world’s preeminent cryptocurrency. For instance, AllianceBernstein now expects Bitcoin to hit $150,000 in 2025, courtesy of the launch of these new spot ETFs and the upcoming halving event in April 2024, when the reward for mining Bitcoin will again be cut in half in what is a regular 4-year cycle. Moreover, Bernstein analysts continue to expect Bitcoin to hit $80,000 by the end of 2024 and $150,000 in 2025.
Wall Street Enters Price War Mode Over Spot Bitcoin ETFs
Last week, a half-baked report from Matrixport unleashed a brief episode of panic across the financial world when it claimed that the SEC would reject all spot Bitcoin ETF applications in January 2024 due to significant hurdles and uncertainties that might only be resolved by the second quarter of 2024.
Look at the S-1 filings today
There are signed legal opinions, consents
Blackrock ALREADY purchased seed Bitcoin
Blackrock announced their fee undercut publicly
These things are getting approved this week with 100% odds
I’m so stupidly long BTC right now lmfao ✌🏻🎌
— kamikaz FIAT (@kamikaz_ETH) January 8, 2024
Since then, however, we have witnessed one encouraging sign after the other, bolstering the financial community’s confidence in betting on the imminent nature of the outstanding spot Bitcoin ETF applications.
Yeah it’s basically done. Latest I’m hearing (from multiple sources) that final S-1s are due 8am on Monday as SEC is trying to line everyone up for Jan 11th launch. That said, I still want to hear it from the SEC to call it official.
— Eric Balchunas (@EricBalchunas) January 5, 2024
After the final Form 19b-4s that came out last week, all spot Bitcoin ETF applicants were expected to file their Form S-1s today, thereby clearing the last remaining hurdle for the SEC’s approval.
Valkyrie, Wisdomtree, Invesco/Galaxy, iShares, Ark/21Shares, Vaneck have all filed updated S-1 filings with the U.S. SEC for Bitcoin spot ETF applications. Bloomberg previously reported that the SEC plans to vote in the coming days. https://t.co/oHCYhKM2Le
— Wu Blockchain (@WuBlockchain) January 8, 2024
These Form S-1s dropped just a few minutes back, showing a veritable price war brewing at Wall Street.
But wait, ARK just dropped their fee to 0.25% in an S-1 filed 20 minutes after BlackRock’s. Told y’all the fee war would break out bf they even launched. And this is w out Vanguard on the mix. Damn. pic.twitter.com/QVRhEXzLey
— Eric Balchunas (@EricBalchunas) January 8, 2024
Grayscale’s Bitcoin Trust (GBTC) has an expense ratio (fee) of just around 2 percent for managing assets that bear a market value of around $25 billion. This means that GBTC generates more income than the incredibly popular QQQ ETF! However, this free lunch of sorts is now at an end. Consider the fact that BlackRock would charge a fee of just 0.20 percent for the first 12 months or until it earns a total of $5 billion. Thereafter, the investment titan would charge a fee of 0.30 percent. Similarly, ARK Invest plans to charge a fee of 0.25 percent on its spot Bitcoin ETF. For comparison, the QQQ ETF bears an expense ratio of around 0.20 percent.
I spoke too soon re: low-water mark!
Ark and 21Shares are going 0.25% and *NO FEE* for the first six months or until $1 billion in assets
these are very, very low numbers https://t.co/zjCRNPJpts pic.twitter.com/NrifnrAAWe
— Katie Greifeld (@kgreifeld) January 8, 2024
When compared with GBTC’s previous haul, these are quite competitive numbers. Nonetheless, Grayscale appears to be resisting this trend, with its upcoming spot Bitcoin ETF charging an annual fee of 1.5 percent. While this is a notable step down from GBTC’s 2 percent expense ratio, such an elevated fee level does relegate Grayscale’s ETF to an outlier.
BITCOIN ETF FEE WARS
Invesco / Galaxy – 0 then 59 bps
Blackrock – 20 bps then 30 bps
Bitwise – 0 then 24 bps
Ark – 0 then 25 bps
Fidelity – 39 bps
Valkyrie – 80 bps
Grayscale – 150 bps
have any others published yet?
— Meltem Demirors (@Melt_Dem) January 8, 2024
Of course, this brutal issuer competition is a win for investors, who get a competitive fee structure paired with the unmatched convenience of gaining exposure to Bitcoin via spot ETFs.