Does the Ethereum ETF “Fee War” Matter to Investors?

Author: Ben Strack, Blockworks; Compiler: Wuzhu, Golden Finance

With U.S. spot Ethereum ETFs expected to launch soon, one detail missing from several proposals is the fees they will charge investors.

These are likely to be listed in the final registration statement, or S-1—filed after the SEC says it’s ready to allow them to start trading. People familiar with the matter noted that this could happen as early as this week.

While price is often an important fund feature in the competitive ETF space, being the cheapest doesn’t guarantee victory in any category of asset race.

Crypto ETF experts and media (including Blockworks) talked about the so-called “fee war” in January, when fund groups prepared to launch the first U.S. spot BTC funds.

They and we are watching again. But it’s hard to quantify exactly what these tiny basis point differences mean to investors.

Franklin Templeton unveiled plans in May for its spot Ethereum ETF to charge 0.19% in fees. VanEck plans to charge a 0.20% fee for a similar product. Invesco and Galaxy Digital said in a filing Monday that they plan to charge a 0.25% fee for their jointly filed ETH fund.

Other issuers preparing to offer Ethereum ETFs — such as BlackRock, Fidelity and Grayscale — have not yet announced fees for their proposed ETH products.

ETF Store President Nate Geraci noted last month that he expects the spot Ethereum ETF fee war to be "as brutal and bloody as the war around BTC funds."

But ETF.com senior analyst Sumit Roy said distribution and brand name are more important to ETH fund issuers than small fee differences.

“BlackRock’s Ethereum ETF is likely to be more popular than an Ethereum ETF from an upstart ETF issuer, even if BlackRock’s fund is priced 5 basis points higher,” he noted.

Roy acknowledged that a larger difference, such as 10 or 20 basis points, could have a greater impact on investors.

Ultimately, he added, the spot bitcoin ETF provides “a great template” for how competition within the Ethereum ETF category could unfold.

“BlackRock and Fidelity have huge advantages that they will exploit, but there is also an opportunity for smaller issuers like Bitwise to gain a foothold in the space with low fees and a unique perspective,” he said.

The lowest fee for a U.S. spot bitcoin ETF (not including the initial fee waiver) is Franklin Templeton’s 0.19%. One day after the fund launched, the firm’s fees were lower than Bitwise’s 0.20%.

But Franklin Templeton’s BTC fund has attracted just $345 million in net inflows six months after going public. The Bitwise Bitcoin ETF (BITB) brought in about $2.1 billion.

Funds from BlackRock and Fidelity lead the category, with $18 billion and $9.5 billion, respectively. Both charge slightly higher fees of 0.25%.

The most expensive fund to date, the Grayscale Bitcoin Trust ETF (GBTC), with a 1.5% fee, has seen $18.6 billion in net outflows.

Industry watchers continue to focus on Grayscale’s fees for its “mini” versions of GBTC and Ethereum Trust (ETHE).

While some advisors said they have moved money from GBTC to cheaper BTC funds, others considered custodians, spreads and liquidity when deciding which ETFs to allocate to.