SEC decision on bitcoin ETFs allows Vault to slash fees

Vault chief executive Vinnie Gardiner says the fee is dropping to 0.95% a year from 1.75% because the  US Securities and Exchange Commission (SEC) decision is cutting the costs incurred by the Vault International Bitcoin Fund (VIBF).

“We always intended to follow down the underlying costs. This was always the strategy. We're actively looking to pass on the reduced costs,” Gardiner told GoodReturns.

Earlier this month, the US Securities and Exchange Commission (SEC) greenlit the ETFs following an appeals court judgment in October last year which described the SEC's view of cryptocurrencies as “arbitrary and capricious."

VIBF is a “fund of funds” which has been investing in bitcoin via Canadian-listed funds but the SEC decision means it can now invest more cheaply in US ETFs.

Gardiner calls this “a momentus decision,” and “a pardigm shift,” and one he's been waiting for since before he launched the VIBF, which is also a portfolio investment entity (PIE) for New Zealand tax purposes, in 2021.

The decision will also lift bitcoin's profile across the market. “You wouldn't get the likes of Blackrock starting to offer this to their customers unless there was background demand,” Gardiner says.

However, he expects many investors will remain cautious and that the market for bitcoin is extremely volatile.

It was trading mid-morning on Monday at above US$41,600 from nearly US$49,000 earlier this month ahead of the SEC decision and compared with below US$16,000 in November 2022.

Gardiner says the cryptocurrency market “is still in its adolescent years. I think we're still at the very early stages of what this will look like,” but that the new US funds may help the market to become less volatile and more liquid over time.

Gardiner says Fidelity was one of the first fund managers to launch bitcoin based ETFs in Canada and that it has a strong research team.

“They've been giving clients exposure to bitcoin for a long time and they don't do that lightly.”

Now that firms such as Fidelity have US-traded funds, “I think we will see a gradual warming” in the market generally towards including bitcoin in portfolios.

A key event coming up in April is the next “halving” of bitcoin, which means the reward for “mining” bitcoin will be cut in half, reducing the rate at which new bitcoins can be created. The last such event was on May 11, 2020 and the last is expected when the number of bitcoin reaches its theoretical maximum of 21 million bitcoins.

Such halving events have been a significant driver of price movement in the past, Gardiner says.