Only 2-3 Spot Bitcoin ETFs Will Survive Long-Term, Grayscale CEO Warns

Grayscale CEO Michael Sonnenshein has predicted that the overwhelming majority of the spot Bitcoin exchange-traded funds (ETFs) approved by the U.S. Securities and Exchange Commission will not stand the test of time. He also touched on Grayscale’s far-costlier fee for its ETF product.

Grayscale CEO Predicts Fewer Bitcoin ETF Survivors

The approval of spot Bitcoin ETFs earlier this month marked a historic event for the cryptocurrency industry. The newly launched investment vehicles already have nearly $30 billion in assets under management. This means Bitcoin has effectively eclipsed silver to become the second-largest ETF commodity asset class in the U.S., trailing only gold.

Total net inflows into the spot BTC ETFs over the past five days currently stand at around $1.2 billion, with Fidelity recently joining BlackRock in the $1 billion-plus inflows club. Meanwhile, Grayscale’s ETF instrument has seen a massive outflow of $2.2 billion as investors swap between ETF products due to the product’s pricey fees. 

Many ETF providers slashed their trading fees ahead of the approvals to widen the gap with competitors. Bitwise currently has the lowest-cost option at 0.20% while Grayscale enforces a huge 1.5% fee. Several spot Bitcoin ETF providers will also be waiving fees for a certain amount of time. Grayscale offers no waivers.

Michael Sonnenshein, CEO of Grayscale — the asset manager that converted its flagship GBTC fund into a spot ETF — has, however, warned that most of the ETFs will fail in the long run.

Speaking during the annual World Economic Forum event in Davos on Thursday, Sonnenshein defended the company’s high fees, stating that only just two or three spot Bitcoin ETF products will survive eventually. 

He noted that Grayscale has a long track record of around 10 years and is the largest Bitcoin holder among spot Bitcoin ETF providers. Since the other issuers are essentially starting at zero, they are trying to lure new customers by reducing their fees dramatically. Grayscale’s extensive track record, according to Sonnenshein, proves the asset manager’s long-term commitment to the ascendant cryptocurrency.

“I think from our standpoint, it may at times call into question their long-term commitment to the asset class […] I don’t think that the marketplace will ultimately have these 11 spot products we find ourselves having.”

Notably, the price of Bitcoin has tumbled by over 17% to $40,644 at press time since the first U.S. spot BTC ETFs went live last week.