Crypto News- Grayscale’s Fees for Its $10bn Ethereum ETF: Why Investors Find Them Unappealing
Crypto News– Grayscale Investments will continue to charge a hefty 2.5% fee for its Ethereum trust when it transitions to an exchange-traded fund (ETF). This fee is significantly higher compared to other upcoming Ethereum ETFs, which are set to launch on July 23.
Eric Balchunas, an ETF analyst at Bloomberg Intelligence, highlighted on X that Grayscale’s ETF will be about 10 times more expensive than its competitors. He noted that this pricing could lead to some backlash.
In contrast, the Ethereum ETFs from BlackRock and Fidelity will each have a 0.25% fee. VanEck and Bitwise are set to charge 0.20%, while Franklin Templeton will offer a fee of 0.19%.
Grayscale’s Unique Position and Fee Challenge
Grayscale’s situation is unique because it isn’t creating a new fund but instead converting its existing Ethereum Trust — ticker ETHE, which manages nearly $10 billion in assets — into an ETF.
The trust was set up so investors could create new shares but couldn’t redeem them. Despite this limitation, it was popular for a long time as it was one of the few ways for Wall Street investors to gain exposure to Ethereum. The exclusivity allowed Grayscale to charge a 2.5% fee.
However, with the upcoming conversion of the trust into an ETF, and the simultaneous launch of other Ethereum ETFs, investors will soon be able to redeem their shares. This means Grayscale could face significant outflows as investors move their assets to cheaper alternatives.
This scenario mirrors what happened with spot Bitcoin ETFs. Since converting its Bitcoin trust into an ETF in January, Grayscale has experienced over $18 billion in outflows.
Grayscale’s Dual Strategy: New Mini Ethereum ETF and Conversion of ETHE
Along with the conversion of ETHE into an ETF, Grayscale is also introducing a new spot Ethereum ETF called the Mini Ethereum ETF. This new fund will feature lower fees — just 0.25% — and will be launched with 10% of ETHE’s assets.
Bloomberg Intelligence ETF analyst James Seyffart noted on X that this move could help mitigate some of the expected outflows from Grayscale’s fund.
However, there are doubts about its effectiveness. Adam Morgan McCarthy, an analyst at crypto data firm Kaiko Research, pointed out a significant factor that might impact demand: staking.
Ethereum holders can lock their Ether in the network through staking to earn a 3% yield. Unfortunately, Ethereum ETFs won’t offer this opportunity to their holders, which could affect their attractiveness.
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