Since the beginning of the year, the recently established Bitcoin Exchange-Traded Fund (ETF) market has garnered attention. Steven McClurg, the Chief Investment Officer of Valkyrie Funds, offers an other viewpoint, predicting possible industry consolidation by year’s end. McClurg estimates that just seven to eight of the ten issuers in existence will likely survive, mostly as a result of high operating costs and fierce competition.
Although trading volumes for Bitcoin ETFs reached $4.5 billion on the first trading day, indicating strong investor interest in the product, obstacles like competition from market titans like Fidelity and BlackRock continue to be significant worries. Despite its low size, Valkyrie has performed satisfactorily, managing assets at about $123.7 million as of February 8. McClurg points out that competing with the major players is a challenge in and of itself, but stresses the need of putting on a strong show in order to win this match.
There’s also the additional difficulty of spot ETFs for Bitcoin having significant operating costs. According to McClurg, some issuers have lowered their costs both before and after launch in an effort to draw in more investors, but this may have an impact on the ETF’s overall profitability. Nevertheless, Valkyrie aims to maintain its profitability while competing with the major competitors, charging a sponsorship charge of 0.25%.
Due to intense competition and difficulties with profitability, McClurg also predicts that there may be fewer issuers in 2019 than in 2018. He emphasizes that in order to thrive in this sector, one must perform well and be able to adjust to changes in a fast-paced corporate environment.
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