TL;DR Breakdown
- Van Eck is planning a “brutal” price war for US-listed bitcoin exchange traded funds
- The VanEck bitcoin fund has a management fee of just 0.15 percent.
Van Eck is planning a “brutal” price war for US-listed bitcoin exchange-traded funds as soon as Monday, less than a week after the debut of the first such vehicle. Van Eck has filed a prospectus with the US Securities and Exchange Commission to start its Bitcoin Strategy ETF (XBTF) “as quickly as feasible
Last week ETF debut was the best ever
The cheaper, less liquid Bitcoin Investment Trust has a cost of 99 basis points compared to the ProShares Bitcoin Strategy ETF’s (BITO) 95 basis point fee, which has amassed more than $1 billion in assets after chalking up the best-ever ETF debut last week. The Bitcoin Fund from Valkyrie Investments (BTF), which started trading on
Nathan Geraci, the president of the ETF Store in Kansas, believes this is likely to be just the beginning of a fight for investors’ wallets.
“BITO has a significant advantage as the first mover,” according to Geraci. “The level of interest in this product is unlike anything we’ve ever seen around an ETF, and it’s only going to continue growing,” he added.
“That said, bitcoin futures ETFs are commodity products. Costs matter, and I believe a fierce fee war will play out in this area. [This] is the start of a merciless fee competition that will continue until one side or the other crumbles.” According to Kenneth Lamont, senior fund analyst for passive strategies at Morningstar
“I don’t think bitcoin is immune to market forces. If you look at other markets, you’ll see that similar stories have played out in recent years. I do not believe that bitcoin is immune to market pressure,” Lamont continued.
VanEck management fees for BTC fund
The VanEck bitcoin fund has a management fee of just 0.15 percent, which is less than the 0.95 percent charged by WisdomTree’s Bitcoin ETP (BTCW), according to TrackInsight data.
The WisdomTree fund, like many other European funds, is physically tethered to bitcoin rather than relying on the futures market as its US counterparts do. The SEC has not yet approved any applications for spot price-based crypto ETFs.
The physically backed CI Galaxy Bitcoin ETF (BTCX), which trades in Canada, charges 40bps, according to TrackInsight. The European portfolio of crypto exchange traded notes from VanEck, which track bitcoin and other cryptocurrencies, costs between 1% and 1.5%. VanEck declined to comment on this story.
Mr. Sapir, the CEO of ProShares, explained that BITO’s charge was justified by claiming that the fund was actively managed rather than passively so, with ProShares’ traders “applying our experience to roll the [futures] contracts,” rather than doing so automatically at a predetermined time before expiry.
However, Lamont was unconvinced that this should be a major consideration. “They label it active, but actively picking when to trade futures across days isn’t the same as managing an equity,” he said.
The emerging fee war has Grayscale Bitcoin Trust, a public trust that invests in the spot market, looking pricey, with a 2% annual management fee.
Global head of ETFs at Grayscale, David LaValle, said the firm is committed to lowering the cost if and when the SEC gives approval to convert this trust into a spot ETF, which it has filed for; nevertheless he didn’t promise anything else.
“We currently own 3.5 percent of the world’s bitcoin. This is the fee profile we’ve always had. Given that we have a product in the market with excellent liquidity and an extremely strong asset base, we feel very good about it.”
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