In a recent CNBC interview at the World Economic Forum in Davos, Grayscale Investments CEO Michael Sonnenshein shared his skepticism about the survival of most of the 11 approved bitcoin exchange-traded funds (ETFs). While defending the Grayscale Bitcoin Trust ETF’s 1.5% fee, Sonnenshein highlighted several reasons for the higher cost, including its status as the world’s largest bitcoin fund, a decade-long track record of success, and a diversified investor base.
The Controversial Fee Structure:
The focus on management fees intensified after the U.S. Securities and Exchange Commission (SEC) approved a range of spot bitcoin ETFs, with industry giants like BlackRock and Fidelity entering the market. However, the Grayscale Bitcoin Trust ETF stood out by charging a 1.5% fee, significantly higher than the 0.2% to 0.4% fees of its counterparts.
Sonnenshein’s Defense:
Sonnenshein defended the higher fee, emphasizing that investors consider factors such as liquidity, track record, and the credibility of the issuer. Grayscale, being a crypto specialist, claims to have paved the way for many similar products and boasts a successful operational history spanning a decade. Sonnenshein believes these factors justify the premium fee, distinguishing Grayscale from newer entrants in the market.
Questioning Competitors’ Commitment:
The Grayscale CEO questioned the motives behind the lower fees offered by other ETF issuers, suggesting that these products lack a track record. He argued that lower fees might be a strategy to attract investors, but it could also raise doubts about the long-term commitment of these issuers to the asset class.
Survival of the Fittest:
Sonnenshein predicted that only two to three of the approved spot Bitcoin ETFs might achieve critical mass in terms of assets under management. He expressed skepticism about the viability of the remaining ETFs, suggesting that the market might not ultimately sustain all 11 approved products.
The debate over bitcoin ETF fees continues to unfold, with Grayscale’s CEO defending the premium cost of the Grayscale Bitcoin Trust ETF. As the cryptocurrency market evolves, investors will likely weigh the trade-offs between fees, track record, and issuer credibility when choosing among the growing array of bitcoin ETF options. The coming months will reveal whether Sonnenshein’s predictions about the survival of these ETFs hold true or if the market proves resilient to the fee controversy.
