Spot Bitcoin ETFs: Only Strongest Will Survive as Costs Crush Issuers

Published by

Qadir AK

February 12, 2024

The cryptocurrency market is buzzing with the arrival of Bitcoin spot ETFs, and Steven McClurg, Chief Investment Officer at Valkyrie Funds, predicts a shakeup in the industry. McClurg anticipates that operational costs and fierce competition will lead to significant changes among ETF issuers by year-end.

In a chat with Decrypt, McClurg highlighted the tough situation for existing ETF issuers. Among the ten contenders, only seven or eight are expected to endure. High operational costs and rivals slashing fees pose serious challenges for struggling issuers.

McClurg suggests maintaining at least $100 million in assets under management to stay competitive in the ETF market.

Inflows on the Rise

Since the Securities and Exchange Commission approved Bitcoin spot ETFs on January 10, the sector has seen a surge in inflows. The first day of trading witnessed an impressive $4.5 billion in transactions.

Valkyrie competes with industry giants like BlackRock and Fidelity, yet it has shown commendable performance. BlackRock’s iShares Bitcoin ETF and Fidelity’s Wise Origin Bitcoin Fund crossed the $3 billion mark in assets under management within a month. Valkyrie, with approximately $123.7 million in assets as of February 8, might have a lower volume but is poised to break records.

Also Read: Grayscale CEO Eyes Options for Spot Bitcoin ETF, Urges SEC Approval

Warning Bells are Ringing!

In response to heightened competition, Valkyrie, like others, has made fee cuts to attract investors, aligning its sponsor fee with industry norms at 0.25%.

McClurg issues a stern warning about the profitability challenges facing current ETF issuers, especially concerning operational costs and sustainability. He advises issuers to amass assets in the millions to secure the longevity of Bitcoin spot ETFs, given their intricate operational costs and the cutthroat competition among issuers.

As McClurg predicts, the landscape for ETF issuers is challenging. Stay safe out there, folks!

Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.