The first Bitcoin exchange-traded funds could launch as soon as next week, but the fee wars between the likes of Fidelity Investments and Invesco have already begun.

Those companies for the first time are detailing in federal filings their planned fees for some of the most anticipated funds in history. The filings show that while the launch of ETFs could end up bolstering the coins, they arent likely to be a bonanza for the companies offering them, at least in the near term.

Fidelity, for example, in a filing on Friday said its Wise Origin Bitcoin Fund will charge merely 0.39% annually in expense fees. Invesco and crypto firm Galaxy, which seek to launch the Invesco Galaxy Bitcoin ETF, said their fund plans to charge 0.59%, though the fee will be waived for six months on the first $5 billion in assets. Other would-be contenders, including Bitwise Asset Management and BlackRock havent yet said in their filings what their funds will charge, and the proposed fees could change before launch in any case.

A BlackRock spokeswoman and a Bitwise spokeswoman each declined to comment.

The Securities and Exchange Commission is expected to soon give the green light to launch funds that hold spot Bitcoin. Funds that hold Bitcoin futures, like ProShares Bitcoin Strategy, have existed since 2021. The agency for years denied such spot Bitcoin applications, but an appellate court last year said the SECs rejection of one such bid was arbitrary and capricious.

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Though the SEC could come up with another reason for rejecting the funds, agency staff have asked potential sponsors for filing updates and other information that would seem to indicate approvals are imminent.

The SEC declined to comment.

Some analysts estimate that the launch of the funds could bring tens of billions of dollars into Bitcoin, as some financial advisors get an easy way to access the cryptocurrency for the first time. On Tuesday, Bitcoins price broke through $45,000 powered in part by anticipation of the ETFs.

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But even if that ends up being the case, it isnt looking like the funds will be an immediate windfall for their sponsors.

Right now, the largest Bitcoin fund is the Grayscale Bitcoin Trust, operated by Grayscale Investments with $26 billion under management. The trust trades like a closed-end fund with price that can deviate from the value of the coins it holds. While the discount had been as steep as 50% in 2022, on Friday it was merely 8%.

The Grayscale funds annual fee right now is 2% of its assets, or about $520 million at current prices.

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Grayscale hasnt said what the fund will charge if it converts. A spokeswoman said only that the company is committed to lowering the fee upon approval.

Out of the starting gate, the Grayscales fund will likely have better liquidity than other contenders, meaning tighter bid/ask spreads for rapid traders who care less about annual expense ratios.

Still, given Fidelity and Invescos disclosures, it is already safe to conclude that the Bitcoin funds wont be a cash cow. At Fidelitys expense ratio, for example, Grayscales $26 billion fund would only yield $101 million in fees, before taking into account the expenses of running the fund.

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Even if the assets under management of the total Bitcoin ETF space were to be double the size of the Grayscale fund, a 0.39% fee would represent only about 1% of the $17.8 billion in revenues that analysts estimate BlackRock earned in 2023. And thats at the starting gate, before fund companies start undercutting one another.

The potential saving grace for fund companies and Bitcoin investors is that some analysts predict the ETF launches could drive prices much higher.

Analysts for Bernstein Research in a note on Tuesday said the coins market cap could more than triple to $3 trillion by mid-2025.

Our only message from the outlook report is BUY THE DIP. And every dip the market offers in 2024, wrote the analysts, led by Gautam Chhugani.

Write to Joe Light at joe.light@barrons.com

Read more from the original source:

Bitcoin ETFs Are Almost Here. The Fee War Is Already Heating Up. - Barron's