Bitcoin ETF: Bitcoin ETFs that are directly traded on the stock market are almost a month old, but there might be fewer of them by the end of the year, according to Steven McClurg, the main investment officer at Valkyrie Funds.
McClurg believes that out of the ten companies existing now, only “about seven or eight” will survive. He explains to Decrypt that the expense of managing a Bitcoin spot ETF might be too high. This is especially true because of a competition to lower fees that can reduce profits for companies that are already having a hard time.
“McClurg said if you haven’t managed to get $100 million by now, you should just give up.”
After the Securities and Exchange Commission approved the first set of Bitcoin spot ETFs on January 10, a lot of money has flowed in. On the very first day, trading reached $4.5 billion, which is a huge beginning. Just yesterday, there was an addition of $400 million, as reported by Bloomberg analyst James Seyffart.
McClurg said that what happened in the market last month mostly matched what Valkyrie expected before they started.
McClurg mentioned that usually, Grayscale turning from a trust into an ETF caused people to sell their Bitcoin, making its price fall below $41,000 before it went back up. But even though this selling pressure has decreased recently, McClurg thinks that more money might be taken out and spread across other ETFs.
Valkyrie is competing against ten other companies, including big names like BlackRock and Fidelity. Since they got the green light, BlackRock’s iShares Bitcoin ETF and Fidelity’s Wise Origin Bitcoin Fund have gathered over $3 billion in assets in just a month. Meanwhile, ETFs from Ark Invest’s 21Shares and Bitwise have brought in more than $700 million.
Considering this, McClurg is happy with Valkyrie’s performance, pointing out that it has done better than ETFs from bigger companies. He believes this success comes from his firm’s extensive experience with digital assets and traditional markets. As of Feb. 8, Valkyrie managed about $123.7 million, which is less than what larger companies handle. However, McClurg says the goal isn’t to outdo them.
McClurg said, “You can’t outdo big companies like BlackRock and Fidelity because they have secure customers. But if you look at smaller companies, I believe we’re performing pretty well.”
The competition among ETFs is very strong, especially seen in the many times they have lowered their fees to attract more investors before and after starting. However, lowering fees also means they make less money.
On Jan 11, Valkyrie reduced its sponsor fee to 0.25%, the same as BlackRock and Fidelity charge. Valkyrie did this to not stand out in a bad way, according to McClurg. However, he also said it’s regrettable to make these cuts so soon.
Because it’s expensive to manage a spot ETF, due to costs like security and keeping the assets safe, companies that are already struggling might find it hard to keep going. This is why McClurg thinks that there will be fewer companies offering these ETFs next year.
McClurg said, “I believe some companies will stop their Bitcoin spot ETFs because they’re not making money and they never will.”
“He added that if you want to find out who is desperate, look for Bitcoin ads during the Super Bowl.”
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