Custodial Fee Wars

Cryptocurrency is still barely represented on traditional markets. The Grayscale Bitcoin Trust (GBTC) and the Bitwise 10 Crypto Index Fund (BITW) have led the pack. With bitcoin’s recent rise, their value has exploded.

But now, a new Bitcoin trust is barreling onto the OTC market: the Osprey Bitcoin Trust (OBTC). This trust boasts a management fee of only 0.49%.

The Grayscale Bitcoin Trust charges a 2% fee, and Bitwise charges a 2.5% fee. Grayscale saw an influx of $3 billion into its trusts in Q4 2020, while Bitwise attracted $500 million over the course of December.

Bloomberg Intelligence believes that Osprey is trying to capitalize on Bitcoin’s popularity by undercutting Grayscale with low fees.

One Bloomberg analyst said that it was “only a matter of time” before another retail company tried to capitalize on the inflow of money into crypto.

Fidelity digital custody services will be looking after Osprey’s Bitcoin. While Fidelity does not provide crypto directly to retail investors, this foray brings the giant brokerage a step closer to full crypto acceptance.

A Bitcoin ETF in the Future?

While these OTC trusts are inching ever closer towards the mainstream and may be more acceptable to institutional investors, an ETF would likely be the holy grail.

The US Securities and Exchange Commission (SEC) has repeatedly denied application for a Bitcoin or crypto Exchange Traded Fund. Such funds are popular with commodities and other similar sectors. They allow investors to easily trade equity in a basket of products.

On January 7, investment firm VanEck filed for a Bitcoin ETF. Though the incoming SEC chief Gary Gensler appears warm to crypto, the law isn’t entirely clear, and such ETFs have been rejected in the past.

The ETF would be a hugely bullish step for crypto. Such a fund would make it easier for investors to put crypto in their tax-advantaged retirement accounts, such as an IRA.

In lieu of that, these trusts such as GBTC and OBTC are filling the gap and could be managed easily in some brokerage accounts.

The Osprey website says that accredited investors would face a $25,000 minimum to buy directly into the trust. Shares also have a one-year lock-up period. Greg King, CEO of Osprey Funds, said that the company would try to reduce that period to six months.

There may be other ways for traditional investors to dip their toes into crypto on the horizon. Both Coinbase and Gemini, huge crypto exchanges, have applied to trade publicly this year.