Ethereum ETF Fee Conflict: BlackRock Outperforms Grayscale, Which Suffers “Angry Outflows”

As the market readies for the launch of Ethereum ETFs on 23 July, issuers are adjusting their fee structures. Bloomberg ETF analyst James Seyffart reports that around seven issuers have secured fee waivers based on various criteria.

Fee Structures: BlackRock vs. Grayscale

Grayscale's Ethereum Trust (ETHE) carries the highest fee at 2.5%, which remains unchanged post-conversion to an ETF. In contrast, BlackRock’s iShares Ethereum Trust offers a reduced fee of 0.25% after waivers, starting at 0.12% for the first 12 months if net assets are below $2.5 billion.

Market Reactions

This disparity in fees has sparked criticism. Nate Geraci of ETF Store labels Grayscale's fee structure a significant oversight, while Bloomberg's Eric Balchunas warns of potential ‘outrage outflows’ due to Grayscale's higher charges.

Balchunas points out that Grayscale’s fees are “10X higher than competition,” which could drive investors away. He anticipates that the Mini ETF, a lower-fee version, will be very affordable, possibly around 0.15%.

Mini Trust Transition

The Grayscale Ethereum Mini Trust, set to spin off from ETHE after conversion, will adopt a fee structure comparable to BlackRock’s at 0.25%, with a starting fee of 0.12%. The Mini Trust is expected to start with approximately $1 billion i

n assets, derived from 10% of ETHE’s current $10 billion.

Despite the Mini Trust's lower fees, forecasts predict substantial outflows from ETHE. HODL15 Capital estimates a potential 50%-60% reduction in ETHE's assets due to the high fees.

Political and Market Implications

SEC Commissioner Hester Peirce suggests that Ethereum ETF staking might face reconsideration amidst upcoming political shifts in the U.S.

Currently, Ethereum (ETH) is trading at $3.4K, having hit resistance at $3.5K. The price may test $4K if it breaks through this barrier.

Grayscale’s high fees could lead to significant investor withdrawals, undermining its market position compared to more competitively priced alternatives.