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US Spot Ether ETF Race Heats Up With Fees in Focus, But Brand May Be King (Did GBTC’s 1.5% Fee Cost Them $18.6 Billion?)

  • The launch of long-awaited US spot ether ETFs is imminent, but a key detail remains shrouded in secrecy: fees.

The much-anticipated launch of US spot ether ETFs is on the horizon, but a key question remains unanswered for many investors: fees. Final details, including fee structures, will likely be revealed in the final registration statements (S-1s) filed with the Securities and Exchange Commission (SEC) before trading commences. This could happen as early as this week, according to industry sources.

Price is undoubtedly a crucial factor in the competitive ETF landscape. However, the race to the bottom on fees may not guarantee victory in the battle for investor assets.

Crypto ETF enthusiasts and media witnessed a similar “fee war” earlier this year as the first US spot bitcoin ETFs debuted. Now, the focus shifts to ether ETFs. Quantifying the exact impact of miniscule basis point differences on investor decisions remains a challenge.

Franklin Templeton set the bar for spot ether ETF fees at 0.19% in May, followed by VanEck’s proposed 0.20% fee for a similar product. Invesco and Galaxy Digital recently upped the ante, indicating a 0.25% fee for their jointly filed ETH fund.

Giants like BlackRock, Fidelity, and Grayscale haven’t revealed their fee structures yet. Industry observers predict a fierce fee war mirroring the one seen with spot bitcoin ETFs. However, analyst Sumit Roy believes brand recognition and distribution channels will hold more weight for ether ETF issuers than marginal fee discrepancies.

“A BlackRock ether ETF would likely attract far more interest than one from a newcomer, even if the BlackRock product charged slightly more,” Roy told Blockworks. He acknowledges that significant fee differences (10-20 basis points) could sway investors more decisively.

Drawing on the experience with spot bitcoin ETFs, Roy suggests a similar pattern might emerge with ether ETFs. “BlackRock and Fidelity hold significant advantages they’ll leverage,” he says. “However, smaller issuers like Bitwise have room to gain a foothold through competitive fees and unique offerings.”

The Franklin Templeton Bitcoin ETF, boasting the lowest fee (excluding introductory waivers) at 0.19%, initially undercut Bitwise’s 0.20% fee. However, after six months, Franklin Templeton’s fund has garnered a mere $345 million in net inflows, compared to Bitwise Bitcoin ETF’s (BITB) impressive $2.1 billion.

Unsurprisingly, brand powerhouses BlackRock and Fidelity lead the pack with $18 billion and $9.5 billion in net inflows, respectively, despite charging a slightly higher 0.25% fee. Meanwhile, the most expensive option, Grayscale Bitcoin Trust ETF (GBTC) with its hefty 1.5% fee, has hemorrhaged a staggering $18.6 billion in net outflows.

Industry experts are keeping a close eye on Grayscale’s pricing strategy for its proposed “Mini” versions of GBTC and Ethereum Trust (ETHE). While some advisors have shifted assets from GBTC to cheaper BTC funds, others emphasize factors like custodians, spreads, and liquidity when making ETF allocation decisions.

The upcoming launch of US spot ether ETFs promises a dynamic landscape, where fees will play a role, but brand recognition and comprehensive offerings might ultimately determine which platforms reign supreme.

Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.

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