Crypto Investors Anticipate Approval of Spot Bitcoin ETF Applications
Crypto investors are eagerly awaiting the approval of several spot bitcoin ETF applications from the Securities and Exchange Commission (SEC), which is expected to happen on Wednesday. This development has sparked discussions about how the ETF will trade, its cost, the impact of demand on bitcoin’s price, and the potential for premium or discount valuations.
Competitive Fees and Price Wars
As nearly a dozen ETFs compete for attention, issuers are engaging in a price war to attract bitcoin buyers. For example, ARK Invest, in partnership with 21Shares, initially announced a fee of 0.8% for their bitcoin ETF but later decided to waive the fee for the first six months. Other issuers such as Bitwise, ARK, and Invesco are also offering 0% fees for the initial six months, while Grayscale charges 1.5%.
Fee Comparison of Spot Bitcoin ETFs
Here are the fees for various spot bitcoin ETFs:
- Bitwise (GBTC): 0.0% (after first six months: 0.24%)
- ARK Invest/21Shares (ARKB): 0.0% (after first six months: 0.25%)
- Invesco Galaxy Bitcoin ETF (BTCO): 0.0% (after first six months: 0.59%)
- iShares Bitcoin Trust (IBIT): 0.20% (after first 12 months: 0.30%)
- VanEck Bitcoin Trust (HODL): 0.25%
- Franklin Templeton Digital Holdings Trust: 0.29%
- Fidelity Wise Origin Bitcoin Trust (FBTC): 0.39%
- WisdomTree Bitcoin Trust (BTCW): 0.50%
- Valkyrie Bitcoin Fund (BTF): 0.80%
- Grayscale Bitcoin Trust (GBTC): 1.50%
Invesco’s Galaxy Bitcoin ETF has set its expense ratio at 0.0% for the initial six months and the first $5 billion in assets, and then adjusts to 0.59%.
Trading and Premium/Discount Concerns
One of the main concerns surrounding spot bitcoin ETFs is how well they will track bitcoin and bitcoin futures. While bitcoin futures ETFs have tracked bitcoin fairly well, the maturity and regulation of the futures market compared to the spot market raises questions. There are also concerns about whether the ETFs will trade at a premium or discount to their net asset value (NAV), which represents the value of the bitcoin held by the ETF.
Reggie Brown, GTS co-Global Head of ETF Trading & Sales, believes some ETFs may initially trade at a premium, but expects the market to filter out any anomalies. Market participants generally anticipate any premiums to be small. Industry insiders like Som Seif of the Purpose Bitcoin ETF and Matt Hougan of Bitwise Asset Management have expressed confidence in the liquidity and efficiency of the underlying bitcoin market, suggesting that trading efficiency should not be significantly impacted.
Potential Inflows and Future Developments
The level of inflows into spot bitcoin ETFs remains uncertain. However, the introduction of bitcoin futures ETFs in 2021 and Blackrock’s application for a bitcoin ETF in 2023 have contributed to increased interest in bitcoin over the past two years. Estimates suggest that the combined ETFs could attract significant inflows, potentially reaching billions of dollars in assets. Despite this, these inflows would still be relatively small compared to bitcoin’s current market capitalization of nearly $900 billion.
The next important issue is whether major institutions and financial advisors will allow their investors to trade bitcoin on their platforms. This decision could have a significant impact on the market. Additionally, forthcoming events such as the bitcoin halving and potential interest rate cuts from the Federal Reserve are expected to shape the future trajectory of the bitcoin market.
