Grayscale Ethereum ETF to Charge A Hefty 2.5% Fees, Another Blunder in Making?

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As a seasoned crypto investor with several years of experience under my belt, I’ve seen my fair share of market fluctuations and product launches. The recent announcement of Ethereum ETF fee structures from various issuers has piqued my interest, especially Grayscale’s decision to charge nearly 10x more than its competitors with a 2.5% fee for its Grayscale Ethereum Trust (ETHE).

On Wednesday, many Ethereum spot ETF providers disclosed their fee structures in preparation for next week’s launch on July 23. The majority of these issuers have set fees below 0.25%. However, Grayscale’s Ethereum ETF stands out with significantly higher fees, charging approximately 10 times more than its competitors at 2.5%.

Grayscale Ethereum ETF – A Blunder In Making?

Grayscale’s approach with its Ethereum Trust (ETHE) is reminiscent of their previous move with the Bitcoin Trust. They plan to transform ETHE into an Ethereum exchange-traded fund (ETF) that directly holds Ethereum, rather than using a trust structure. However, it appears Grayscale may not have fully grasped the lessons from the substantial $18.7 billion withdrawals experienced by their spot Bitcoin ETF.

With over $10 billion in assets managed by the Grayscale Ethereum Trust (ETHE), there’s a strong potential for at least $5 billion to shift towards competing platforms offering more appealing fees, mirroring the trend seen with the Grayscale Bitcoin Trust (GBTC).

Will Grayscale replicate the $GBTC fee mistake with $ETHE?
If so, expect 50%-60% outflows Just over $10 Billion AUM
— HODL15Capital (@HODL15Capital) July 17, 2024

Regarding this recent update, Eric Balchusas of Bloomberg ETF Strategist commented: “Grayscale remains unaffected by the reduction in fees from competitors. This implies a significant advantage for Grayscale, potentially sparking controversy and causing some investors to withdraw their funds. My prediction is that the smaller rival ETF will have extremely low management fees, possibly around 15 basis points.”

Nate Geraci, president of ETH Store, expressed concern over Grayscale’s potential repeated error. He reproached Grayscale for prioritizing immediate gains over a strategic, long-term perspective.

Btw, think this is *huge* miss by Grayscale…
If you’re gonna charge *2.5%* on ETHE, need to undercut market w/ mini trust.
Disappointing.
The entire pricing approach for both Bitcoin and Ethereum spot ETFs appears geared toward generating immediate profits, rather than adopting a long-term perspective.
— Nate Geraci (@NateGeraci) July 17, 2024

Will mini ETH Filing Compensate?

On Tuesday, July 17, Grayscale made a filing for its Ethereum Mini Trust, with fees set at 0.25% – the same as industry peers. Nevertheless, according to Balchunas, this fee isn’t competitive enough to challenge giants like BlackRock, which is launching an Ethereum ETF soon. In a message on platform X, Balchunas discusses why investors might prefer Grayscale over a well-known brand such as BlackRock.

As a crypto investor, I’m considering investing in a new cryptocurrency fund with relatively low fees. However, I’m not entirely convinced that these fees are low enough to significantly attract organic flows, given that many other funds charge similar fees and the well-known brand name BlackRock carries the same fee structure. Moreover, I ponder if these newly established funds possess sufficient strength to counterbalance potential outflows akin to Bitcoin’s volatile market movements. In summary, the 2.5% fee may not be enough to make a significant difference in this competitive landscape.

— Eric Balchunas (@EricBalchunas) July 17, 2024

The Ethereum price has encountered resistance at the $3,500 mark and is now experiencing some profit-taking. There’s speculation that the upcoming US SEC decision next week might lead to selling before renewed buying interest sets in.

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2024-07-18 06:24