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Asset manager Grayscale is faced with a major hurdle in its quest for a spot Bitcoin (BTC) Exchange Traded Fund (ETF). Earlier this week, a Federal court ruled that the United States Securities and Exchange Commission (SEC) must review its rejection of Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) product into a spot Bitcoin ETF.
Grayscale Bags New Crypto Victory
This Grayscale ruling marked a second landslide for the cryptocurrency industry against the markets regulator following Ripple’s victory back in July. According to some analysts led by Gautam Chhugani, the ruling “likely clears the path for a spot bitcoin ETF,” and increases the chances that the SEC might approve all the current applications from BlackRock, Fidelity, WisdomTree and others together.
However, Grayscale has found itself in the never-ending contest of the Exchange Traded Products (ETP) industry over fees. The current form of the Grayscale ETF carries a 2% fee, a peg the company may find tough to sustain if it will stay competitive.
Looking at other U.S.-listed ETFs that have an average of 0.54% or other globally-listed crypto exchange-traded products with a 1.48% fee, the Grayscale product fee can be judged to be considerably high.
Michael Sonnenshein, Grayscale’s Chief Executive Officer (CEO) claimed that an adjustment will possibly be made to the fees when GBTC converts to an ETF. Markedly, he did not specify how low Grayscale will be willing to go on the fees.
Grayscale to Face Tough Fee Competition
It is worth noting that the likes of BlackRock Inc., Invesco Ltd and Fidelity Investment are yet to state specific fees for their proposed Bitcoin ETFs. Still, it is expected to be only a fraction of Grayscale’s fee. Nate Geraci, president of popular advisory firm The ETF Store, reiterated this possibility.
“Grayscale is up against issuers such as BlackRock and Invesco who are highly accustomed to bludgeoning each other on fees. Spot-Bitcoin ETFs will all generally look the same – they simply hold Bitcoin — which makes fees a key differentiator,” he said.
Geraci went on to suggest that Grayscale may need to enter the ETF “Terrordome” with an open mind which may mean going from a 200 basis point to a 20 basis point.
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