Bitwise CIO Matt Hougan on Their Spot Bitcoin ETF’s Competitive Fee Structure

On 8 January 2024, Matt Hougan, the Chief Investment Officer of Bitwise Asset Management, appeared on Bloomberg TV’s “Bloomberg ETF IQ” to discuss the firm’s forthcoming spot Bitcoin ETF in the United States. During the conversation with Katie Greifeld, Eric Balchunas, and Scarlet Fu, Hougan shed light on various aspects of the ETF, including its fee structure, market positioning, and potential impact on investors.

Proposed Fee and Rationale

Hougan began by addressing the ETF’s proposed fee of 24 basis points. He emphasized that Bitwise is acutely aware of the importance of fees for ETF investors, noting that lower fees directly benefit them. With over seven years of experience in structuring crypto investment products, Bitwise aims to fine-tune this ETF for the evolving market. Hougan expressed confidence that the ETF era of crypto would be advantageous for both investors and issuers, describing the 24 basis point fee as a functional and exciting development.

However, earlier today, Bitwise decided to make their spot Bitcoin ETF even more competitive by dropping their management fee to just 20 basis points:

Comparative Fee Analysis

When asked about Grayscale reducing its management fee from 2% to 1.5%, Hougan chose not to comment directly on this competitor’s strategy. However, he acknowledged the historical precedent in the ETF market for significant expense disparities between competing products. He suggested that each ETF would likely find its appropriate investor segment.

Market Dynamics and Liquidity Concerns

Addressing concerns about market dynamics, such as spreads and premium discounts, Hougan stressed the importance of considering the total cost of any ETF. This includes the expense ratio and trading fees. He expressed confidence in the liquidity of the Bitcoin market, citing Bitwise’s extensive experience in managing investment products. Hougan anticipates that the ETFs will operate in liquid markets, though he acknowledged the need to observe how they perform in terms of spreads and premium discounts post-launch.

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