In a move that could spark a price war among Bitcoin ETF providers, BlackRock and ARK Invest have announced that they are lowering the annual fees for their respective products.
BlackRock, the world’s largest asset manager, said on Monday that it would reduce the expense ratio of its Bitcoin Futures ETF (BTCF) from 0.95% to 0.75%, effective from January 10. The fund, which launched in October 2021, tracks the performance of Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME).
ARK Invest, the innovation-focused investment firm led by Cathie Wood, followed suit on Tuesday, saying that it would cut the fee for its Bitcoin ETF (ARKB) from 0.95% to 0.65%, effective from January 11. The fund, which debuted in November 2021, invests directly in Bitcoin through a custodian.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
Both funds have seen strong demand from investors since their inception, with BTCF and ARKB holding about $1.2 billion and $800 million in assets under management, respectively, as of January 7. However, they also face fierce competition from other Bitcoin ETFs that have lower fees or offer exposure to the spot market.
The spot market is where Bitcoin is bought and sold for immediate delivery, while the futures market is where contracts are traded that promise to deliver Bitcoin at a specified date and price in the future. The spot price reflects the current supply and demand of Bitcoin, while the futures price reflects the market’s expectations of future movements.
Investing in futures or spot Bitcoin has different advantages and disadvantages. Futures contracts can provide leverage, hedging, and arbitrage opportunities, but they also involve higher fees, rollover costs, and basis risk. Spot Bitcoin can offer direct ownership, lower fees, and tax benefits, but it also requires secure storage, reliable custodians, and regulatory compliance.
For instance, the Valkyrie Bitcoin Strategy ETF (BTF), which launched in December 2021 and invests in both futures and spot Bitcoin, charges a fee of 0.5%. The Bitwise Bitcoin ETF (BITO), which also tracks CME futures contracts, has a fee of 0.95%, but it has hinted at lowering it in the future. The VanEck Bitcoin Trust (XBTF), which is expected to launch soon and will be the first U.S.-listed ETF to hold physical Bitcoin, will charge a fee of 0.65%.
The fee reduction by BlackRock and ARK could put pressure on other Bitcoin ETF providers to follow suit or risk losing market share. Lower fees could also attract more investors to the nascent industry, as they would reduce the cost of gaining exposure to the leading cryptocurrency.
However, fees are not the only factor that investors should consider when choosing a Bitcoin ETF. Other aspects, such as liquidity, tracking error, tax implications, and counterparty risk, could also affect the performance and suitability of different products. Moreover, investors should be aware of the volatility and regulatory uncertainty that surround the Bitcoin market, and only invest what they can afford to lose.
A closely-watched decision on Bitcoin is expected on Wednesday as the Securities and Exchange Commission faces a deadline to rule on at least one of the 11 applications for exchange-traded funds that hold the cryptocurrency. It comes after the SEC said late Tuesday that an announcement earlier in the day indicating they had been approved was false. An agency spokesperson said hackers using the SEC’s official X account made the inaccurate claim, but it had yet to make an official decision. Optimism has been building for weeks around a potential SEC approval, with the price of the cryptocurrency more than doublingsince last January.
X late Tuesday confirmed the account was compromised, saying that based on its investigation, an unidentified individual got control of a phone number associated with the account through a third party. (lINKEDIN NEWS)
CNBC reports spot Bitcoin?ETF likely to be approved Wednesday, potentially trading on Thursday or Friday
The cryptocurrency world is buzzing with anticipation as the U.S. Securities and Exchange Commission (SEC) is expected to approve the first spot Bitcoin ETF this week, according to CNBC sources. A spot Bitcoin ETF is an exchange-traded fund that tracks the price of the underlying asset, in this case, Bitcoin, rather than relying on futures contracts or other derivatives. This means that investors can gain exposure to the largest and most popular cryptocurrency without having to buy, store, or manage it directly.
The SEC has set a deadline of Wednesday, January 10, 2024, to make a decision on the VanEck Bitcoin Trust, one of the several spot Bitcoin ETF proposals that have been filed with the regulator. VanEck is a well-known asset manager with over $80 billion in assets under management and has been pursuing a Bitcoin ETF since 2017. The firm has partnered with SolidX, a blockchain technology company, to provide custody and insurance for the Bitcoin holdings of the fund.
If approved, the VanEck Bitcoin Trust could start trading as soon as Thursday or Friday on the Cboe BZX Exchange, under the ticker symbol XBTF. This would mark a historic milestone for the crypto industry, as it would be the first time that U.S. investors can access Bitcoin through a regulated and mainstream investment vehicle. The launch of a spot Bitcoin ETF could also boost the demand and liquidity for Bitcoin, as well as increase its adoption and acceptance among institutional and retail investors.
However, the approval of a spot Bitcoin ETF is not a foregone conclusion. The SEC has been notoriously cautious and skeptical about crypto-related products and has rejected or delayed dozens of Bitcoin ETF applications in the past. The main concerns of the regulator are related to the potential for market manipulation, fraud, and lack of investor protection in the crypto space. The SEC has also indicated that it prefers a futures-based Bitcoin ETF over a spot one, as futures markets are more regulated and transparent than spot markets.
Therefore, there is still a possibility that the SEC could deny or postpone the decision on the VanEck Bitcoin Trust or impose strict conditions or limitations on its operation. Moreover, even if the VanEck Bitcoin Trust is approved, it could face competition from other spot Bitcoin ETFs that are waiting for the SEC’s green light, such as those from Valkyrie Investments, NYDIG Asset Management, WisdomTree Investments, and Bitwise Asset Management.
Additionally, there are already several futures-based Bitcoin ETFs that have been launched in the U.S. market since October 2021, such as those from ProShares, Invesco, Valkyrie, and VanEck itself.
Therefore, investors who are interested in gaining exposure to Bitcoin through an ETF should do their due diligence and research before making any decisions. They should also be aware of the risks and volatility involved in investing in crypto assets, as well as the fees and taxes that may apply. A spot Bitcoin ETF may be an attractive and convenient option for some investors, but it is not a guarantee of success or profitability.