Bitcoin ETFs: A Fee War is Heating Up as Issuers Compete for Market Share

The U.S. Securities and Exchange Commission (SEC) is expected to make a decision on the approval of spot bitcoin exchange-traded funds (ETFs) by January 10, 2024. This has sparked a fierce competition among the issuers of these funds, who are trying to attract investors with lower fees and better services. Here are some of the key developments in the spot bitcoin ETF race.

Fidelity Leads the Way with Low Fees and Waivers

One of the major issuers of spot bitcoin ETFs is Fidelity Investments, which has submitted a revised filing with the SEC on January 8, 2024. According to Bloomberg Intelligence ETF analyst James Seyffart, Fidelity lowered its fees to 0.25% from the previous 0.39% and has offered a fee waiver to 0% through July 31, 2024. This makes Fidelity’s fee one of the lowest in the market, and also shows its commitment to providing a competitive product.

Fidelity is not alone in offering low fees and waivers. Other issuers such as Bitwise, Wisdomtree, Invesco/Galaxy, Valkyrie, and ARK/21Shares have also revised their fee structures or offered temporary waivers after they received feedback from the SEC. These issuers are hoping to gain an edge over their rivals by offering lower costs and higher returns to investors.

SEC Compromises Its Account on Twitter

As the crypto community eagerly awaits the SEC’s final decision on spot bitcoin ETFs, the regulator disrupted the tension with its official social media account posting a false announcement of approval for listing and trading bitcoin ETFs. The tweet was posted on January 9, 2024 by @SECGov, which was later revealed to be compromised by an unauthorized individual who obtained control over a phone number associated with the account.

The tweet read: “The SEC has approved listing and trading of spot bitcoin exchange-traded products.” However, this was quickly debunked by SEC Chair Gary Gensler, who tweeted: “The SEC twitter account was compromised, and unauthorized tweet was posted. The SEC has not approved listing and trading of spot bitcoin exchange-traded products.

The incident raised questions about the security and reliability of the SEC’s communication channels, as well as its transparency and accountability in handling crypto-related matters. Some critics have accused the SEC of being slow and inconsistent in its approach to regulating crypto assets.

What’s Next for Spot Bitcoin ETFs?

The spot bitcoin ETFs are seen as a major milestone for crypto adoption in the U.S., as they would provide investors with a convenient and regulated way to access bitcoin without having to deal with custody or storage issues. However, there are still some challenges and uncertainties that could affect their launch.

One of them is whether or not they will be approved by the SEC before January 10, 2024. The regulator has been cautious and skeptical about approving such products due to concerns about market manipulation, fraud, custody risks, liquidity issues, tax implications, and investor protection. The SEC has also delayed several applications for spot bitcoin ETFs in recent years due to various reasons.

Another challenge is whether or not there will be enough demand for these products from investors who are willing to pay high fees for exposure to bitcoin. Some analysts have argued that there is already enough liquidity in other platforms such as Grayscale Bitcoin Trust (GBTC) or Coinbase Pro that offer similar services at lower costs. Others have suggested that there may be more interest in futures-based contracts or other derivatives that track bitcoin prices rather than holding actual bitcoins.

Regardless of these challenges or opportunities, one thing is clear: spot bitcoin ETFs are likely to remain active players in the crypto space for a long time. As more issuers enter or exit this market with different strategies and features, investors will have more choices and options than ever before.