Grayscale Fees for Spot Ethereum ETF 10 Times Higher Than Competition

As spot Ethereum exchange-traded fund (ETF) issuers gear up for a potential launch day next week, one issuer is employing a vastly different strategy than the rest.

Crypto investment manager Grayscale Investments revealed in a filing that it plans to leave fees at 2.5% after converting its Grayscale Ethereum Trust (ETHE) into a spot ether ETF. This means that fees on ETHE will be 10 times higher than the eight other ETFs (except for ProShares, which is yet to disclose fees on its Ethereum ETF).

Grayscale is rolling out another spot ether-based fund – the Grayscale Ethereum Mini Trust (ETH) – which it will seed with 10% of ETHE’s assets as soon as it launches. Based on ETHE’s current AUM, that equates to over $1 billion worth of liquidity for the Ethereum Mini Trust.

Grayscale revealed that it will charge 0.25% fee, with an initial fee of 0.12% for the first 12 months or until the fund reaches $2 billion in assets under management (AUM) for the mini trust. Still, with other issuers charging similarly competitive fees, it remains to be seen whether this will work in their favor.

BlackRock and Fidelity plan to charge a 0.25% sponsor fee on their funds, with BlackRock charging an initial fee of just 0.12% for the first $2.5 billion or 12 months, and Fidelity waiving the entire sponsor fee until the end of the year.

Bitwise and 21Shares will charge a fee of 0.20% and 0.21% respectively, but waive this amount entirely for the first six months or until the fund’s AUM hits $500 million.

VanEck will also charge a 0.21% fee, with a fee waiver period of 12 months or until the first $1.5 billion in assets, and Franklin Templeton will charge a 0.19% fee, waiving the amount until the first $10 billion in assets or Jan. 31, 2025. Invesco Galaxy will charge 0.25% fee and will not include a fee waiver.

“I’m not sure what Grayscale’s strategy is here. Feels like they started with the right idea, then it got botched somewhere along the way,” said Scott Johnsson, a general partner at Van Buren Capital.

“Investors selling ETHE are probably not going to be charitable with your mid-price mini option after you stick them with a 10x fee and force them to realize gains.”