Quick Take:

• VanEck will waive fees for its Ethereum ETF until 2025 or until the fund reaches $1.5 billion in assets.
• Most prospective ETF issuers have not yet disclosed their fee structures.
• Ethereum ETF fees are expected to be competitive, potentially lower than those for Bitcoin ETFs.

As the launch of spot Ethereum exchange-traded funds (ETFs) approaches, investment-management firm VanEck has announced a strategic move to waive fees for its Ethereum ETF until some unspecified time in 2025 or until the fund reaches $1.5 billion in assets. This decision underscores the intensifying competition among ETF issuers to dominate the burgeoning market.

Fee Waiver Strategy

VanEck’s fee waiver, revealed in a recent filing, highlights the firm’s aggressive approach to capturing market share in the early stages of Ethereum ETF adoption. Once the fund reaches the $1.5 billion threshold or the year 2025 arrives, VanEck plans to impose a modest 0.20% fee. Matthew Sigel, VanEck’s head of digital-assets research, elaborated on the strategy in a post on X (formerly Twitter), stating, “VanEck aims to be a leader on crypto ETF fees even if it means we lose money at the outset. The plan is to make it up on volume; in this case, decentralized finance volume.”

Market Impact

Sigel suggested that if Ethereum ETFs generate renewed interest in Ethereum, the resulting network activity could drive up the price of Ether, benefiting VanEck’s holdings. This tactic mirrors VanEck’s approach to its spot Bitcoin ETF, which also has a fee waiver until the fund hits $1.5 billion or March 31, 2025, whichever comes first. So far, the Bitcoin ETF has accumulated $614 million in assets, making it the sixth-largest spot Bitcoin ETF.

Fee Wars and Competitors

Out of nine prospective Ethereum ETF issuers, VanEck and Franklin Templeton are the only ones who have disclosed their fee structures. Franklin Templeton has set its Ethereum ETF fee at 0.19%, the same as its Bitcoin ETF. According to Eric Balchunas, a Bloomberg Intelligence ETF analyst, firms typically do not disclose their fees until the final stages of the ETF launch process. Many are likely waiting for BlackRock to reveal its fee structure, which is anticipated to set the benchmark for the industry.

Balchunas noted, “What BlackRock is going to charge is probably the single most important missing variable outside of the exact launch date. Their fee is the sun that the rest will need to orbit around.” He added that VanEck and Franklin Templeton’s competitive fee announcements will pressure BlackRock to offer an ETF with fees lower than 0.30%.

Lower Fees Expected

Early indications suggest that Ethereum ETFs may have fees as low or even lower than those for Bitcoin ETFs. This potential for reduced fees could attract more investors, thereby increasing competition among issuers. The cost structure will play a crucial role in investor decisions, especially as they weigh the benefits of staking their Ether holdings through exchanges and decentralized platforms to earn yields, which is not an option through Ethereum ETFs.

Staking vs. ETFs

A significant consideration for institutional investors is whether to stake their Ether to earn yields or to invest in an Ethereum ETF. Staking allows investors to earn approximately a 3% yield on their holdings. However, this is not feasible through Ethereum ETFs, raising questions about the attractiveness of ETFs if staking remains a more profitable alternative.

Conclusion

VanEck’s bold move to initially waive fees for its Ethereum ETF sets a competitive tone in the market. By removing fees temporarily, VanEck aims to attract significant investor interest and capital. As the launch of these ETFs draws nearer, the focus on fee structures will intensify, with major players like BlackRock expected to influence the market significantly. The competitive landscape promises to be dynamic, with issuers striving to offer the most appealing products to capture investor attention and funds.