Grayscale CEO Drops Bombshell: Only 2-3 Spot Bitcoin ETFs Will Survive

The spot Bitcoin ETF fee competition will not prevent the funds from eventually exiting the market, according to the Grayscale CEO.

Grayscale Investment CEO Michael Sonnenshein anticipates that the majority of the spot Bitcoin exchange-traded funds (ETFs) approved by the United States Securities and Exchange Commission (SEC) won't survive.

During a Jan. 18 interview at the World Economic Forum in Davos, Switzerland, Sonnenshein predicted the potential failure of most of the 11 approved spot Bitcoin ETFs.

The U.S. SEC officially greenlit 11 spot Bitcoin ETFs on Jan. 10, with 10 commencing trading the next day. In a bid to enhance competitiveness, many ETF issuers actively reduced their trading fees, with most approved ETFs setting fees between 0.2% and 0.4%. Several spot Bitcoin ETF providers also implemented temporary fee waivers.

In contrast, Grayscale, holding the largest Bitcoin portfolio among spot Bitcoin ETF issuers, imposes fees as high as 1.5% without any waivers.

Sonnenshein defended Grayscale's fees for its spot Bitcoin ETF product, the highest in the market, asserting that only two or three spot Bitcoin ETFs will endure, and the remainder will be withdrawn from the market:

“I think from our standpoint, it may at times call into question their long-term commitment to the asset class […] I don’t ultimately think that the marketplace will ultimately have these 11 spot products we find ourselves having.”

Sonnenshein's remarks were delivered on the fifth day of spot Bitcoin ETF trading in the United States. Since the trading commenced, Grayscale has emerged as the sole issuer aggressively divesting Bitcoin, liquidating as much as 37,947 BTC by Jan. 18. In contrast, the other nine issuers have incorporated at least 40,000 BTC into their products since the initiation of trading.

Mati Greenspan, the founder of Quantum Economics, doesn't dismiss the possibility that most ETF issuers are likely to face challenges in the long term, as many investors may prefer holding their assets or opting for self-custody.

“For now, having spot ETFs is a good way for some portfolio managers to gain exposure who wouldn’t otherwise be able to,” – Greenspan said, adding:

“But having 11 of them is pretty ridiculous. There will have to be a consolidation, and they all know it, which is why fees are on the floor.”

Some executives at spot Bitcoin ETF issuers believe there’s no conflict between self-custody and spot Bitcoin ETFs. “Self-custody and an ETF are not mutually exclusive,” ARK Invest CEO Cathie Wood said during a space on X on Jan. 10. She also noted that ARK’s Bitcoin ETF — which charges a fee of 0.21% — doesn’t aim to maximize profits.

“We are looking at Bitcoin as a public good. And one of the ways to do that is this low-fee product. We have other actively managed strategies where we can do more on the profitability side. That is not our objective here,” Wood stated.

Meet Rahul Nambiampurath from Kerala, India, a skilled freelance writer specializing in cryptocurrency. Rahul, who studied finance at Sikkim Manipal University, is an expert in areas such as cryptocurrencies, blockchain technology, NFTs, and Web3, the new era of the internet. Rahul started exploring cryptocurrencies in 2014 and gained over fi ..
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