Two major issuers, Fidelity Investments and Galaxy/Invesco, have announced the fee structures for their proposed Bitcoin Exchange-Traded Funds (ETFs). This move comes amid growing anticipation of the U.S. Securities and Exchange Commission’s (SEC) approval of Bitcoin ETFs, a decision that could reshape the landscape of cryptocurrency investments.
According to a recent report from Fortune, Fidelity’s Wise Origin Bitcoin Trust will charge a fee of 0.39% per annum, while Galaxy/Invesco’s BTCO fund will implement a 0.59% annual fee, waived for the first six months of operation, and the initial $5 billion in assets. These fees, disclosed in a December 29 court filing, reflect the issuers’ strategies to attract investors in a competitive market.
The role of authorized participants
The structure of these Bitcoin ETFs reveals a strategic approach to their operation. Notably, Jane Street Capital will serve as the authorized participant for the Bitcoin ETFs of Fidelity, WisdomTree, and Valkyrie. This role is crucial, as authorized participants are responsible for arbitraging price differences between the fund’s shares and Bitcoin itself, ensuring the ETF prices align closely with the actual Bitcoin market.
Additionally, Valkyrie has named Cantor Fitzgerald as a second authorized participant. Galaxy/Invesco and BlackRock have appointed JPMorgan and Virtu for this role. These partnerships indicate a robust framework for maintaining the ETFs’ market efficiency.
A cash-based ETF model
A unique aspect of these ETFs is their adoption of a “cash” model for creation and redemption, diverging from the traditional “in-kind” model. This approach means that authorized participants will not directly purchase Bitcoin for the funds. Instead, they will deposit cash equivalent to the desired amount of Bitcoin, which the fund will then use to buy BTC. This model aligns with the SEC’s preference, which aims to limit broker-dealers’ direct handling of Bitcoin.
The SEC’s stance on Bitcoin ETFs seems to be evolving. Following a pivotal lawsuit victory by Grayscale against the SEC, the agency appears more open to these investment vehicles. This change in attitude is significant, considering the SEC’s previous rejections of several Bitcoin ETF applications due to concerns over market maturity and manipulation risks.
Market impact and investor sentiment
As the crypto community eagerly awaits the SEC’s official announcement, the potential approval of Bitcoin ETFs is already influencing market dynamics. Bitcoin’s price has surged to nearly $46,000, its highest since April 2022, fueled by investor optimism.
The approval of Bitcoin ETFs is expected to introduce a new wave of investors to Bitcoin, potentially enhancing its market stability and growth. With multiple issuers, including BlackRock and Franklin Templeton, vying for approval, the competition is set to intensify, offering investors a diverse range of options in this emerging sector.
In conclusion, the impending approval of Bitcoin ETFs marks a watershed moment in cryptocurrency investment. By bridging traditional finance and the digital asset world, these ETFs promise to expand Bitcoin’s accessibility and appeal, heralding a new era in the crypto market.
