Bitcoin (BTC) Spot ETF Fees: Which Provider Is Cheapest Amid Bidding War Between Ark, Invesco, iShares, Others

Key Takeaways

• A spot Bitcoin ETF tracks the actual price of Bitcoin, holding the cryptocurrency as its underlying asset, unlike futures ETFs that track Bitcoin futures contracts.
• Key players like Ark, Invesco, and iShares bring varied ETF offerings, each with unique features and investment strategies tailored to different investor preferences.
• Bitcoin spot ETF issuers engage in a bidding war, striving to offer the most competitive fee structures to attract investors seeking cost-efficient options.
• The emergence of a spot Bitcoin ETF has been highly anticipated, offering investors a more direct exposure to Bitcoin’s price movements within the regulated ETF space.

What Is The Spot Bitcoin ETF?

A spot Bitcoin ETF is a type of exchange-traded fund (ETF) that tracks the price of Bitcoin. Unlike Bitcoin futures ETFs, which track the price of Bitcoin futures contracts, spot Bitcoin ETFs hold actual Bitcoin as their underlying asset. This means that the price of the ETF will be as close as possible to the current market price of Bitcoin.

A spot Bitcoin ETF has been a long-awaited prospect, and currently, the Securities and Exchange Commission (SEC)  is reviewing several applications. There’s potential for approvals to be granted in the first quarter of 2024.

How Do Spot Bitcoin ETFs Work?

Spot Bitcoin ETFs work by pooling together investors’ money and then using that money to buy Bitcoin. The ETF shares are then created and listed on a stock exchange. Investors can buy and sell ETF shares just like they would any other stock.

When an investor buys shares of a spot Bitcoin ETF, they are essentially buying a small piece of the Bitcoin that the ETF holds. The value of their investment will go up or down as the price of Bitcoin goes up or down.

History Of Spot Bitcoin ETF Rejections

After over a decade of numerous attempts to get a U.S. spot in the Bitcoin ETF, the highly anticipated ETF is expected to materialize in 2024. When looking back into the Bitcoin past, Bitcoin ETFs have been proposed and rejected many times.

For instance, the SEC rejected Bitcoin ETF proposals from the Winklevoss twins, founders of the Gemini exchange. Their initial proposal dates back to July 2013, followed by a second attempt in June 2018. Despite their efforts, both proposals faced rejection by the SEC.

Bitwise faced rejection from the SEC in October 2019, while Wilshire Phoenix’s proposal met a similar fate in February 2020. VanEck attempted a Bitcoin ETF proposal in December 2020, but their efforts in 2021 also failed to materialize into reality.

SEC Briefly Approves (Then Denies) All Bitcoin ETFs in Twitter Hack Debacle

In a bizarre turn of events, the official Twitter account of the SEC was hacked on January 9th, leading to a brief and wildly inaccurate announcement that all Bitcoin ETFs had been approved for trading. The episode sent shockwaves through the cryptocurrency community before the SEC quickly regained control of its account and clarified that no such approval had been granted.

However, the euphoria was short-lived . The SEC hack also raises questions about the agency’s cybersecurity measures. For the cryptocurrency industry, the episode serves as a stark reminder of the regulatory uncertainty surrounding Bitcoin ETFs. While the SEC has not explicitly rejected any proposals, it has yet to approve any, leaving the industry in limbo. 

The hack may further delay the approval process, as the SEC likely will focus on shoring up its cybersecurity infrastructure before making any decisions on Bitcoin ETFs.

The Bidding War Among Spot Bitcoin ETF Issuers

With industry key players like Ark Invest, Invesco, and BlackRock fighting for investor favor and regulatory approval, the US spot Bitcoin ETF market is heating up. 

From BlackRock’s affordable costs and institutional appeal to Ark’s thematic DeFi exposure, each offers distinct characteristics and target markets. This competitive race promises diverse offerings and a potential boost for the crypto market, with the ultimate winner yet to be determined.

The following sections shed light on the management fee structures of Bitcoin spot ETFs offered by major players in the asset management industry.

iShares Bitcoin Trust

BlackRock, a renowned asset management firm, offers the iShares Bitcoin Trust with a management fee of 0.25%. BlackRock has implemented a tiered fee structure, reducing this fee to 0.12% for the first $5 billion in assets over 12 months. 

Investors should be aware that additional costs, such as expense ratios and transaction fees, may apply, potentially impacting the overall investment cost in this ETF.

Grayscale Bitcoin Trust

Grayscale Investments manages the Grayscale Bitcoin Trust and will carry a management fee of 1.5%. This trust offers investors exposure to Bitcoin in a more traditional investment vehicle, bypassing the direct purchase and storage of Bitcoin.

Wise Origin Bitcoin Trust

Fidelity’s Wise Origin Bitcoin Trust will hold a management fee of 0.39%, offering a more cost-effective option for those seeking Bitcoin-linked investments. This fee is competitive compared to other trusts, making it a possible choice for investors focusing on lower expense ratios.

ARK 21Shares Bitcoin Trust

ARK 21Shares Bitcoin Trust, managed jointly by ARK Invest and 21Shares, will charge a management fee of 0.21%. 

Unique to this trust is its fee-waiver policy, offering to waive all fees for the first six months or the first $1 billion in assets. This approach positions it as an attractive option for early investors, potentially reducing initial investment costs. 

VanEck Bitcoin Trust

VanEck, a well-established investment management firm, will operate the VanEck Bitcoin Trust with a management fee of 0.25%, providing investors access to Bitcoin’s market performance.

Wisdom Tree Bitcoin Trust

WisdomTree Investments, renowned for its innovative investment solutions, offers the WisdomTree Bitcoin Trust. The trust will allow investors to purchase spot Bitcoin, charging a management fee of 0.50%.

Valkyrie Bitcoin Trust

Valkyrie Digital Assets will manage the Valkyrie Bitcoin Trust. Valkyrie will charge a management fee of 0.80%, with the potential for temporary fee waivers at the company’s discretion, although no current plans for such waivers are in place.

Invesco Galaxy Bitcoin Trust

In collaboration with Galaxy Digital, Invesco will offer the Invesco Galaxy Bitcoin Trust, blending traditional financial expertise with digital asset innovation. 

The trust enables investors to purchase spot Bitcoin, paying a management fee of 0.59%. Invesco has announced a fee waiver for the first six months on the initial $5 billion in assets to attract investors. 

Franklin Templeton Digital Holdings Trust

Franklin Templeton, a global investment management firm, presents the Franklin Templeton Digital Holdings Trust and will offer investors a path to Bitcoin exposure. 

The trust is characterized by a relatively modest management fee of 0.29%, positioning it as a competitive option among other spot Bitcoin ETFs.

Bitwise Bitcoin ETF

Bitwise Asset Management, known for its focus on index and beta crypto funds, will offer the Bitwise Bitcoin ETF. The fund comes with a management fee of 0.20%, and the company has announced a fee waiver on the first $1 billion in assets. 

The Bitwise Bitcoin ETF represents the firm’s commitment to providing accessible cryptocurrency investment options to investors globally.

Hasdex Bitcoin Futures ETF

Hashdex, a pioneer in cryptocurrency investment funds, manages the Hashdex Bitcoin Futures ETF. The ETF, currently focused on Bitcoin futures, carries a management fee of 0.94%. Hashdex has filed for converting this futures-based ETF into a spot Bitcoin ETF, signaling a strategic shift toward direct Bitcoin exposure.

Key Considerations Before Choosing A Spot Bitcoin ETF

Forget FOMO! Before diving into Bitcoin ETFs, consider crucial factors beyond fees like past performance, team pedigree, liquidity and hidden risks.

• Management fees: Lower fees mean more investment toward the actual asset, but consider service quality and performance.
• Performance history: Review the ETF’s past performance for insights into fund management.
• Reputation of issuer: Established companies with good track records that offer more reliability and competence are often preferred.
• Liquidity: ETFs with higher trading volumes are usually more liquid, facilitating easier buying and selling.
• Alignment with investment goals: Ensure the ETF fits the overall investment strategy, whether for short-term gains or long-term investment.
• Risk management: Understand the risks with Bitcoin and how the ETF manages them.
• Regulatory compliance: Check the ETF’s compliance with regulations, impacting its stability and longevity.

What Are The Benefits And Drawbacks Of A Spot Bitcoin ETF?

When considering a spot Bitcoin ETF, it’s important to weigh both its benefits and drawbacks:

Benefits

• Increased accessibility: An ETF makes investing in Bitcoin easier for those unfamiliar with the cryptocurrency exchanges, broadening the investor base.
• Regulatory oversight: An ETF provides investors with a regulated investment vehicle, providing security and legitimacy to purchasing Bitcoin.
• Reduced risk of direct ownership: Investors may gain exposure to Bitcoin’s price movements without the risks associated with directly holding and managing the cryptocurrency.
• Market liquidity: A Spot Bitcoin ETF may increase Bitcoin’s market liquidity, increasing the liquidity surrounding Bitcoin and making trading smoother and more efficient.

Drawbacks

• Regulatory uncertainty: The ever-changing regulatory landscape for cryptocurrencies could affect the stability and performance of a spot Bitcoin ETF.
• Market volatility: Bitcoin’s price is volatile, and Bitcoin volatility may be reflected in the ETF’s value.
• Limited exposure: The ETF only tracks Bitcoin and does not provide exposure to the broader, diverse cryptocurrency market.
• Potential For market manipulation: Despite being a regulated investment, there is still an inherent risk of market manipulation, which could affect the ETF’s performance.

What Would The Approval Of A Spot Bitcoin ETF Do For Bitcoin?

The anticipated U.S. Bitcoin ETF is expected to significantly enhance institutional investors’ credibility and acceptance of Bitcoin as an investment vehicle. Bitcoin is still often viewed as a high-risk or speculative asset by many traditional investors. 

The SEC’s approval of a spot in Bitcoin ETF would simplify the process for institutional investors to invest in Bitcoin, ultimately integrating Bitcoin into Wall Street’s trading ecosystem alongside other traditional assets like commodities, stocks, and bonds. 

A Bitcoin ETF would outline a clear pathway for substantial institutional investment in Bitcoin within mainstream financial markets. 

Conclusion

A spot Bitcoin ETF represents a significant advancement in the cryptocurrency investment landscape. The ETF will offer a regulated platform for investors to gain exposure to digital currencies like Bitcoin (BTC) and, in the future, Ether (ETH), without the complexities of direct ownership. 

The development and potential approval of a spot Bitcoin and Ethereum ETF by the SEC will be marked as significant moments in the crypto space on its path to widespread acceptance. The ETF’s approval signals a shift toward greater institutional acceptance with the ETFs managed by prominent asset firms. 

The offering of an ETF promises to increase market liquidity and will provide a safer, more accessible investment option for both seasoned and new investors. However, they also come with their own set of challenges, including regulatory uncertainties and market volatility. 

FAQs

Which companies offer spot Bitcoin ETFs with management fees between 0-0.4%?

Several spot Bitcoin ETFs feature management fees under 0.4%, include Fidelity’s Wise Origin Bitcoin Trust at 0.39%, Bitwise Bitcoin ETF at 0.20%, BlackRock’s iShares Bitcoin Trust at 0.25%, and ARK 21Shares Bitcoin ETF at 0.21%, offering cost-effective investment options.

What are the management fees for spot Bitcoin ETFs above 0.4%?

Valkyrie Bitcoin Fund and Hashdex Bitcoin Futures ETF have management fees above 0.4%, catering to investors prioritizing unique features or specific investment strategies. (same)

How do management fees impact my investment in a spot Bitcoin ETF?

Management fees, deducted from your investment, affect overall returns. Lower fees can lead to higher net earnings, making fee comparison an important market to analyze before purchasing from a spot Bitcoin ETF trust.

Are there any spot Bitcoin ETFs with fee waivers or reductions?

BlackRock’s iShares Bitcoin Trust initially reduces its fee to 0.12% for the first $5 billion in assets for 12 months. Similarly, ARK 21Shares Bitcoin ETF waives all fees for the first six months or for the first $1 billion in assets, making these options particularly attractive for early investors.

About the Author

Andrew Kamsky

Andrew Kamsky is a writer and chart analyst, holding a degree in Economics and an ACCA certification. Andrew’s professional background spans roles at a Big Four accountancy firm, a fintech bank, and a chart analyst position at a listed bank focusing on foreign currency hedging. Beyond his financial career, Andrew is passionate about music, glass neon lights and travel.

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