21Shares radically underprices competitors
Swiss crypto specialist 21Shares has launched the world’s cheapest core bitcoin ETF, in an effort to fend off under-pricing from competitors.
The 21Shares Bitcoin Core ETP (CBTC), will invest directly in bitcoin held in custody by Copper.
It will complement – and compete against – the 21Shares Bitcoin ETP (ABTC), the firm’s existing bitcoin ETF that holds $158 million. ABTC charges a higher 1.49% fee and uses Coinbase as its custodian. Aside from the custodian and the fee, there are no discernible differences between ABTC and CBTC that I can see.
21Shares said that the ultra-low fee ( 0.21%) – which is a full 40 bps cheaper than its nearest competitor – is achieved by using bitcoin lending to cover operational costs.
Bernie’s commentary – fee war arrives in crypto land
The fee war has well and truly come to crypto ETFs. While you could argue that it’s been going on for years, this is the first attempt by a provider to go nuclear. CBTC is probably defining the floor for how low bitcoin ETF fees can go. This is because it charges a fee so low that profitability is virtually impossible. Or, at least, highly unlikely until it hits billion dollar scale.
I guess the obvious question many will ask is why is 21Shares launching a self-competitor? Why not just lower the fee of ABTC?
I think the old iShares experience is instructive. iShares has a whole line of core equity ETFs that directly compete with its older and higher fee ETFs (IEMG vs EEM, IVE vs IEAFA). The reason iShares built them is that they want to keep people invested in the older funds as they make more revenue. New money can come into the newer low fee ETFs, which compete with Vanguard. Capital gains taxes effectively lock legacy investors in the higher fee funds.
21Shares is pursuing a similar strategy. And it is using the downturn in the crypto market, and the fact that it has a stronger balance sheet than some competitors, as the time to put the knitting in. It strikes me as an aggressive strategy, and suggests that 21Shares has unwavering faith in the future of the crypto market.
Disclosure: I was fortunate enough to win the 21 Shares Toblerone at the last ETF conference, however I am not being nice to them due to a surfeit of very tasty chocolate, but due to the fact that i always applaud reduction of fees for investors.