Cathie Wood’s Ether ETF Pullback Is Likely Due to Fee War

And then, within the past week, it bowed out without explaining why.

As a researcher studying the crypto ETF market, I would attribute the fierce competition among firms to offer low fees as the primary driving force behind this trend.

At the recent CoinDesk Consensus conference in Austin, I, as an investor in ARK, shared during a fireside chat that our spot bitcoin ETF, which was launched earlier this year, hasn’t been generating substantial revenue for us yet due to its low fee structure. Despite this being on par with what other Bitcoin ETF issuers charge, it’s notably less than what traditional non-crypto ETFs usually demand.

As an analyst, I would put it this way: “Given my observation, if Ark 21Shares Bitcoin ETF (ARKB) manages to surpass $3.5 billion in assets under management within a mere five-month period, yet Ark is unable to generate profits, that raises significant concerns.”

ETF managers collect a fee from investors to cover the costs of managing the fund. Many investors aim to keep this expense as low as possible, as it reduces their potential earnings.

Grayscale’s decision to charge a higher fee of 1.5% for its bitcoin investment product, as compared to competitors, may be a significant factor contributing to the mass withdrawal of funds totaling billions of dollars by investors. As a result, BlackRock has surpassed Grayscale in terms of assets under management in the race to launch a spot bitcoin ETF.

“James Seyffart, an ETF analyst at Bloomberg Intelligence, expressed surprise that the fee war among companies had become so intense before any launches had even taken place.”

the extremely low fees could have led to insufficient revenue for both firms. In this scenario, particularly if they anticipate less demand for an Ethereum ETF compared to a Bitcoin ETF, it’s plausible that only one firm stood to benefit financially from the partnership.

Among the potential contenders for issuing a bitcoin fund, only Franklin Templeton has disclosed its fee structure thus far. According to their filing, they have proposed a management fee of 0.19%. This fee is consistent with what Franklin Templeton charges for managing their existing Bitcoin ETF.

Although Ark’s ETFs have relatively low fees, many were surprised by the firm’s decision to exit the competition. With a solid reputation and various other ether investment options available, Ark had been a formidable player in the industry.

“As an analyst, I find it intriguing that Ark decided to stay out of the SPOT ETF category, given their progressive stance on cryptocurrencies. From a strategic branding perspective, I had expected them to be more proactive in this area, as they have distinguished themselves from competitors by embracing crypto trends early on.”

A representative for Ark Invest could not be reached for comment.