As the Bitcoin spot exchange-traded funds (ETFs) complete their inaugural month, Valkyrie Funds’ Chief Investment Officer, Steven McClurg, shares insights with Decrypt, projecting a likely consolidation in the number of Bitcoin ETF issuers by the end of 2024.

Market Consolidation Predicted

Despite the strong market debut of Bitcoin spot ETFs, with a record $4.5 billion traded on the opening day, Valkyrie’s CIO forecasts a decrease in the number of issuers, citing operational costs and fee competition. “We might see the numbers dwindle from the current ten to just seven or eight,” McClurg stated in the interview on February 10th.

The $100 Million Viability Threshold

McClurg emphasizes the importance of an ETF reaching $100 million in assets under management (AUM) for its sustainability. This threshold is becoming increasingly challenging to maintain due to the aggressive fee cuts across the industry aimed at wooing investors.

Robust Inflows Despite Grayscale’s Outflows

Market response has remained favorable with Bloomberg reporting substantial inflows, including $400 million in a single day. Grayscale’s conversion from a trust to an ETF was expected to cause significant outflows but resulted in a less severe Bitcoin sell-off than anticipated, temporarily dipping below $41,000.

Competition in the ETF Arena

With industry giants like BlackRock and Fidelity amassing over $3 billion in AUM within a month, Valkyrie’s more modest $123.7 million reflects a competitive but differentiated market strategy. “Our combination of digital asset savvy and traditional market acumen positions us well against our peers,” McClurg opined confidently.

Aggressive Fee Reductions

As a strategic move to stay competitive, Valkyrie has matched its sponsor fee to 0.25%, aligning with BlackRock and Fidelity. While McClurg agrees on the necessity of this decision, he also cautions about the timing and sustainability of such fee reductions for struggling issuers.