Grayscale Shocks Community With 10X Ethereum ETF Fee

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As a seasoned financial analyst with over a decade of experience in the ETF industry, I have witnessed the evolution of various investment products and their fee structures. Grayscale’s recent announcement of a 2.5% sponsor fee for its proposed Ethereum spot ETF (ETHE) is quite surprising to me, considering the intense competition in this space.

Just like other Ethereum ETF applicants, Grayscale has disclosed the sponsor fee in its proposed rule modification.

Grayscale does not care about outflow

Grayscale’s request for a 2.5% management fee on its Bitcoin investment product might raise some eyebrows, given the lower fees charged by other potential issuers at around 0.25%. This means Grayscale’s fee is significantly higher, ten times that of its competitors.

Based on my extensive experience in the cryptocurrency market and following the latest developments at Grayscale, I can confirm that they are maintaining a fee of 2.5% for their Ethereum Trust ($ETHE). However, they will be divesting a significant 10% of the shares into Ethereum ($ETH) around the time of its upcoming upgrade or launch. Despite this move, they have chosen not to adjust $ETHE’s fee at all.— James Seyffart (@JSeyff) July 17, 2024

Based on all available evidence, it appears that the firm has failed to heed the lessons from the substantial redemptions experienced by its GBTC product within half a year of its debut. According to Eric Balchunas, a senior ETF analyst at Bloomberg, and Nate Geraci, president of ETFStore, this could be a misstep on Grayscale’s part. Currently, the firm’s Ethereum Trust (ETHE), which is slated for conversion into an active Ethereum ETF, manages approximately $10 billion in assets under management (AUM).

According to these analysts, if the recent update from the company results in ETHE mirroring GBTC’s trend, Grayscale could potentially stand to lose over $5 billion to competitors offering more enticing fee structures.

Spot Ethereum ETF fee structure of Grayscale’s competitors

As a researcher, I would put it this way: Franklin Templeton led the way among Ethereum ETF applicants by disclosing a management fee of 0.91%. Invesco Galaxy, on the other hand, proposed a sponsor fee of 0.25% annually for its QETH Ethereum ETF.

VanEck announced that they would temporarily waive the fees for their Ethereum ETF without specifying a duration, extending up to 2025 or when the assets surpass $1.5 billion, whichever occurs first. Following this period, a 0.2% sponsor fee will be charged. In a similar vein, Bitwise declared a six-month exemption from fees until the trust’s Ethereum holdings reach $500 million.

More recently, 21 Shares proposed a sponsor fee of 0.21% for each unit of their Ethereum ETF. Yet, they intend to exempt this fee during the initial six-month period.

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2024-07-18 16:05