Crypto investors are waiting for the Securities and Exchange Commission to approve a raft of spot bitcoin applications, likely Wednesday.
With a spot bitcoin ETF now looking very real, attention is turning to the details of how it will trade, how much it will cost, how much of the runup in bitcoin is due to demand that has been pulled forward, and premium or discount valuations.
Fees are competitive and will get more so
With nearly a dozen ETFs competing for attention, bitcoin buyers will be very price sensitive, and issuers are already engaged in a modest price war. For example, Cathie Wood’s ARK Invest, which is partnering with 21Shares to launch a bitcoin ETF, initially announced a fee of 0.8% but on Monday announced no fee for the first six months.
Other issuers are also steeply discounting prices, with several (Bitwise, ARK, Invesco) offering 0% fee for the first six months, while Grayscale is charging 1.5%.
Spot bitcoin ETF fees
Bitwise (BITB) 0.0% (after first six months: 0.2%)
ARK Invest/21Shares (ARKB): 0.0% (after first six months: 0.21%)
Invesco Galaxy Bitcoin ETF (BTCO) 0.0% (after first six months: 0.39%)
iShares Bitcoin Trust (IBIT) 0.12% (after first 12 months: 0.25%)
VanEck Bitcoin Trust (HODL) 0.25%
Franklin Bitcoin ETF (EZBC) 0.29%
Fidelity Wise Origin Bitcoin Trust (FBTC) 0% (after July 31, 2024, 0.25%)
WisdomTree Bitcoin Trust (BTCW) 0.0% (after first six months 0.3%)
Valkyrie Bitcoin Fund (BRRR) 0.0% (after three months 0.49%)
Grayscale Bitcoin Trust (GBTC) 1.5%
Hashdex Bitcoin (DEFI) 0.9%
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 goes to 0.39% after.
Source: Bloomberg/SEC.gov
How will a spot bitcoin trade relative to bitcoin and bitcoin futures?
One of the main questions is how well a spot bitcoin ETF will track bitcoin and bitcoin futures.
Simeon Hyman, ProShares’ global investment strategist who manages the largest bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO) that launched in October 2021, noted that bitcoin futures ETFs have tracked bitcoin “fairly well.” But he also told me, “The spot market for bitcoin is still not mature. The futures market is regulated and mature. We’ll have to wait and see how well they track against each other.”
Another issue is whether the bitcoin ETFs will trade at a premium or discount to their net asset value. In this case, the NAV is the value of the bitcoin owned by the ETF. Some are concerned that the creation and redemption process that was agreed upon to create spot bitcoin ETFs could result in a bitcoin ETF trading at a premium to its NAV.
