Spot bitcoin ETF applicants are racing to the bottom with fee schedules for their proposed funds as they seek to pick up market share in the first few months — if such exchange-traded funds are approved.

Multiple applicants, including BlackRock, Fidelity, and VanEck, filed amended S-1 forms today — some revealing their proposed fees for the first time. Others have revised their fees in light of the competition.

Leading the pack is Bitwise, which has gone with zero fees for the first six months or until the first $1 billion in assets. Then its fee will be 0.24%, the lowest of the lot.

Coming in a close second is Ark/21Shares, which has offered zero fees for the first six months or until the fund has $1 billion in assets. Once that's over, its fee will be 0.25%, right behind Bitwise. This is substantially lower than its originally suggested fee of 0.8%.

Coming in third is BlackRock, offering fees as low as 0.2% for the first 12 months or until the fund hits $5 billion in assets. After that, it will move to 0.3% — near the lowest in terms of fees.

"Told y’all the fee war would break out [before] they even launched. And this is [without] Vanguard on the mix. Damn," said Bloomberg ETF analyst Eric Balchunas on X. 

VanEck has put out a fixed fee of 0.25%, which will be tied for the lowest fee after the temporary fees for rival ETFs have stopped. After this, Fidelity is at 0.39% and Invesco/Galaxy at 0.59%. Invesco/Galaxy is also offering zero fees for the first six months or until the first $5 billion in assets. 

"One quick note on the temporary fee waivers that we’re seeing in the bitcoin ETFs. Historically this hasn’t moved needle much (one ETF back in day actually paid you to invest in it until it reached certain aum mark but no one cared). Advisors focused on regular fee since [they're] long term investors. That said given all these ETFs all do same thing maybe it will matter all else equal, we’ll see." he added.

Other issuers are offering even higher fees, with Valkyrie at 0.8% and Hashdex at 0.9%. Grayscale, which is trying to convert its flaship bitcoin trust to an ETF has lowered its fees from 2% to 1.5%. Some issuers haven't yet filed amended S-1 forms, so there might be some changes to come.

Why are fees so low?

As Bloomberg reporter Katie Greifeld noted on X — with particular reference to Ark/21Shares offering zero fees for a limited time — "these are very, very low numbers." She compared this to SPDR Gold Shares, the largest physically backed commodity ETF, which charges 0.4%.

With these low fees, potential spot bitcoin ETF issuers are clearly competing through their respective fee structures to try to pick up market share in the first few months of a potential launch. This is likely based on the idea that whoever picks up momentum first might carry it through — as well as the notion that there is a massive potential market for such products.

For instance, VanEck estimates spot bitcoin ETFs will see $1 billion inflows in the first few days and $2.4 billion within a quarter. Galaxy predicts inflows at $14 billion within the first year. Looking further ahead, Bitwise anticipates around $72 billion of market size within five years.

With the final documents handed in and fees largely sorted out, it's now up to the SEC to decide whether to approve the 19b-4 forms and for the S-1 forms to come into effect. If both of these happen, trading can start the following day, and the competition for market share will begin.

Update: Added further details on fee schedules and adjusted article in light of Bitwise's fee structure.