The Bitcoin spot ETF approvals are expected to be announced this week. The final decisions are now expected to come this Wednesday, with trading starting before the end of this current week.
In preparation for all of this, each ETF administrator is required to disclose what their management fee for the respective funds will be. These figures are being revealed, and Anthony Pompliano is calling this a “fee war.”
In an update shared with clients, Anthony Pompliano, an entrepreneur and investor, noted that Grayscale’s GBTC has been the “goliath” in the room for several years.
Grayscale has handled tens of billions of dollars in the largest bitcoin fund, to date. Anthony Pompliano further explained that this trust structure had a 2% management fee, which is more than double the average ETF fee.
He added that the argument was that bitcoin “was more expensive to manage, so the fee was justified.”
In reality, however, Anthony Pompliano pointed out that Grayscale had a monopoly in the US “on the publicly traded bitcoin funds.”
As explained in the update, they could “charge whatever they wanted.” Clearly, this was an amazing business for them and they likely will “never get the credit they deserve for the incredible work they did to educate, and onboard, so many investors to the digital currency,” Anthony Pompliano noted.
Competition is coming “fast and furious,” though, he added.
Grayscale revealed this morning that their management fee “will drop to 1.5% once they convert the trust structure to an ETF.” Although a 25% reduction in their management fee may sound large, this will leave Grayscale “significantly higher than almost all of their competition.”
You may review some of the other management fees that ETF providers have revealed here.
These figures are coming out really fast this morning, so any updates are not part of Anthony Pompliano’s analysis.
He also noted that another area of “fees” is the bid/ask spread for these ETFs.
According to Bloomberg’s Eric Balchunas, the expectation is that any ETF “with healthy volume the spread will only be 1-2 basis points.” That won’t be “a big deal for almost all investors in these ETFs.”
However, something more “interesting” is happening with these fee wars on the ETF.
Van Eck advisor Gabor Gurbacs notes that it will “cost less to hold a Bitcoin ETF for a year than a single trade on Coinbase.” So the ETFs may actually “create a drop in transaction fees for the crypto exchanges as well, not just the crypto-native asset management firms.”
He goes on to highlight a “potential downside” to these low fees on the ETF applications:
“Bitcoin ETFs are coming in with pricing structures in the low double digit range and many with waivers and discounts. This clearly benefits the holders. However, it scares me when little to no money is made. Issuers will look elsewhere to make money (securities lending, trading, etc) I personally just like an upfront higher fees with clear and sustainable incentives. If possible a deep look into total cost of ownership. But that’s not how the ETF pricing battles go. People like to see low numbers.”
These are key points to keep in mind as the ETFs are approved and scaled, Anthony Pompliano noted.
Here are a few predictions from Pompliano:
- The spot bitcoin ETF is approved this Wednesday and starts trading on Thursday
- The ETFs receive at least $2 billion in AUM within 48 hours
- The ETFs receive at least $5 billion in AUM in the first 30 days
- Blackrock emerges with the highest AUM outside Grayscale after the first 90 days
- The marketing spend to promote bitcoin spot ETFs is more than $100 million cumulatively
- There are at least one bitcoin spot ETF ad played in the Super Bowl
- Financial advisors around the country begin allocating 1-3% of client assets to bitcoin
- At least one sovereign wealth fund announces they bought the spot bitcoin ETF within the first 12 months
- Speculation around an ETH spot ETF will intensify by end of Q1
- Non-bitcoin ETF issuers begin allocating some of their AUM into the bitcoin spot ETF
- Bitcoin’s volatility drastically reduces in the next 3 years
- Bitcoin’s compound annual growth rate falls to ~20% within 5 years
He concluded that regardless of what happens, the long-term outlook of Bitcoin “remains a positive one.”
