The Bitcoin exchange-traded fund (ETF) landscape is heating up, but according to Valkyrie Funds’ Chief Investment Officer Steven McClurg, not all players will survive the competitive onslaught. With nearly a month since the launch of spot Bitcoin ETFs, McClurg anticipates a dwindling number of issuers by the year’s end.
McClurg forecasts that out of the current ten operating issuers, only “about seven or eight” will remain viable. The primary concern revolves around the formidable costs associated with running a spot ETF for Bitcoin, exacerbated by a relentless fee-cut war that threatens profitability.
The intense competition has spurred significant inflows, with over $4.5 billion traded on the first day alone. However, despite the initial enthusiasm, McClurg notes that challenges, such as unexpected outflows and aggressive fee cuts, have emerged. With established competitors like BlackRock and Fidelity swiftly amassing billions in assets under management, smaller players like Valkyrie face an uphill battle.
Despite Valkyrie’s relatively modest $123.7 million in assets under management, McClurg remains optimistic, citing the firm’s expertise in both digital assets and traditional markets. Nonetheless, the pressure to remain competitive has led Valkyrie to adopt a sponsor fee aligned with industry giants.
McClurg warns that sustaining profitability amidst escalating costs and cutthroat competition will likely lead to consolidation within the market. As issuers grapple with financial viability, McClurg suggests that some may opt to withdraw from the arena altogether.
Amidst the fierce competition, McClurg’s prognosis underscores the tumultuous landscape of the Bitcoin ETF market, where survival hinges on navigating a delicate balance between attracting investors and maintaining profitability.
