The Crypto ETF Revolution Can Pose Major Risks to Crypto Exchanges. Here’s Why

The cryptocurrency market got its first Bitcoin ETF this week after a long. The market also responded in equal measure with an overwhelming demand for the ProShares strategy Bitcoin ETF.

Well, this could be just the beginning of the crypto revolution coming to the market over the next decade. The $7 trillion ETF industry has played a key role in reducing the fee and costs of the asset management industry.

ETFs or exchange-traded funds trade similar to stocks. The costs of using them have dropped significantly and their expense ratios have reduced to half over the last two decades.

A similar revolution could be expected in the crypto space which could be challenging for the crypto exchanges that have been charging hefty fees. Bloomberg’s senior ETF analyst Eric Balchunas calls it the mother of all trends and said that it will steal business from exchanges. In his recent Twitter post, Balchunas writes:

ETFs are like a Terrordome, no one barely makes any money, everyone used to living on dirt and scraps and battling Vgrd. Lean af, adapting to The Great Cost Migration. It will steal business from crypto, esp from exchanges, unless they self-cannibalize a bit.

Businesses Charging Hefty Crypto Fee Could by In Danger

Citing an article from Quartz, Balchunas compares the trading fee for exchanges like Coinbase and that of ETF. Crypto exchanges like Coinbase charge a hefty fee anywhere between 1.49% to 9.99%. Similarly, existing Bitcoin funds like the Grayscale Bitcoin Trust (GBTC) also charge 2% which is still higher than the ETF fund standards.

On the other hand, the ProShares Strategy Bitcoin ETF charges only 0.1%. Thus, in contrast to the hefty fees, Quartz notes that:

“A trader using a brokerage app can pay almost nothing to buy and sell an ETF representing the entire US stock market all day long. If those competitive forces are unleashed on the trading of digital assets, the days of fat fees for crypto brokers and exchanges (often one-in-the-same) could come to an end”.

Furthermore, it notes that the ETH industry has a way of solving the legal and regulatory aspects of bringing new assets into the market. Thus, it adds that ETF creators will come up with creative new ways to bet on virtual assets.