Barely more than a month into its existence as one of the original US-listed spot bitcoin exchange traded funds, the VanEck Bitcoin ETF Trust (HODL) is already home to $193.34 million in assets under management (as of Feb. 21).
That rapid start for HODL has led to an impressively fast fee cut. When HODL debuted last month, it did so with an annual fee of 0.25%, but that’s already been trimmed to 0.20%, according to a VanEck filing with the Securities and Exchange Commission (SEC).
HODL’s “objective is to reflect the performance of the price of Bitcoin less the expenses of the Trust’s operations. The Trust is a passive investment vehicle that does not seek to generate returns beyond tracking the price of bitcoin,” according to the issuer.
Why HODL Fee Cut Matters
The fee reduction on HODL is pivotal. 10 ETFs have debuted on the same objective; it’s accurate to say the spot bitcoin ETF space is intensely competitive. Because these products do the same thing, advisors and retail investors will turn to fees as a deciding factor.
HODL’s new annual expense ratio of 0.20% puts the fund in a tie for the second-lowest yearly fee in the category. The lower the fee, the more money a long-term HODL investor keeps.
The reduced fee is important for another reason. It signals that with more than $193 million in assets under management, HODL’s economics are favorable for VanEck. Don’t take that lightly. Bitcoin custody and security are factors that could weigh on spot bitcoin ETF issuer profitability, particularly if the fund isn’t a prolific asset gatherer. Obviously, that’s not a condition afflicting HODL.
“Custodial banks in traditional finance settle trades and manage regulatory reporting, dividends, and other shareholder services. Custodians keep and manage client assets, such as stocks, which is why stock traders rarely see any of the actual shares they purchase,” reported Harrison Miller for Investor’s Business Daily. “Cryptocurrency custodians fulfill a similar role, but with some key differences that makes the process more complex.”
With that in mind, a case can be made that not only is it impressive that HODL’s fee was so quickly cut, but it’s encouraging as well and could set the stage for more of the same in the future as the fund increases in heft.
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