Most Bitcoin ETFs Will Fail, Predicts Grayscale CEO Amid Trading Fee Cuts
Summary:
Grayscale Investment CEO Michael Sonnenshein predicts that most U.S. Securities and Exchange Commission-approved spot Bitcoin exchange-traded funds (ETFs) are likely to fail. Despite the majority of funds cutting trading fees between 0.2%-0.4%, he believes only two or three will endure, questioning their long-term commitment to the asset. Cathie Wood, CEO of ARK Invest, disagrees, stating that Bitcoin ETFs and self-custody of Bitcoin can coexist, focusing on Bitcoin as a public good rather than profit.
According to Michael Sonnenshein, CEO of Grayscale Investment, the majority of spot Bitcoin (BTC) exchange-traded funds (ETF) endorsed by the U.S. Securities and Exchange Committee (SEC) are destined to fail. With 11 such funds gaining SEC approval and beginning trade in January, Sonnenshein shares his forecast at the World Economic Forum with CNBC that most will be unsuccessful. Competition has led many ETF providers to slash trading fees, resulting in most funds now operating within a 0.2%-0.4% range. Temporary fee waivers have also been introduced by numerous Bitcoin ETF providers.
Despite this, Grayscale - the largest holder of Bitcoin among the approved issuers - retains a fee of 1.5%, with no offered waivers. Sonnenshein, defending this stance, maintains that only two or three of the ETFs will survive in the long term, with others likely bowing out. He questions the long-term commitment of the majority, and doubts the marketplace will sustain all 11 operational products.
Since the launch of the ETFs, Grayscale has notably unloaded approximately 37,947 BTC, while the remaining nine issuers have added an estimated 40,000 BTC to their portfolios. Mati Greenspan, founder of Quantum Economics, shares Sonnenshein's belief that most issuers will not maintain their positions in the long run, due to the likelihood of investors choosing to hold or self-custody their assets. He conceded that the presence of spot ETFs offers portfolio managers a potentially positive asset exposure.
There is consensus among some ETF issuers that the existence of spot Bitcoin ETFs and self-custody Bitcoin are not conflicting. Cathie Wood, CEO of ARK Invest, asserts that the company's Bitcoin ETF (which charges a 0.21% fee), is not solely profit-oriented, but rather views Bitcoin as a public good. Consequently, their focus lies more on actively managed strategies, rather than maximizing profitability in this particular case.
Published At
1/19/2024 3:30:00 PM
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