Trump's Truth Social withdraws Bitcoin ETF application, analyst: the market is already a red ocean with fierce competition and little profit to be made

Trump's social media platform Truth Social's ETF issuer Yorkville has officially withdrawn its spot Bitcoin ETF application from the SEC.

In an official press release, Yorkville attributed the withdrawal to the regulatory framework differences between the 33 Act ETP and the 40 Act ETF. However, Bloomberg ETF analyst James Seyffart mockingly commented on this.

He pointed out that this regulatory distinction has long been "common knowledge" in the cryptocurrency ETF industry, and there have been no new developments — in other words, this reason was present from the start of the application, and using it to justify the withdrawal now is logically flawed.

He suggested that the real behind-the-scenes driver is market competition. (Implying that the company lacks confidence in facing the competition)

The bottom line of the spot BTC ETF market fee rate

Last month, Morgan Stanley launched its spot BTC ETF MSBT, which set a record low annual fee rate of 0.14% in the U.S. spot Bitcoin ETF market. On its first day, it attracted $31 million in inflows, with total inflows reaching $230 million, surpassing the net assets of Hashdex and WisdomTree's BTC funds.

What does this number indicate?

The fee rate competition in the spot Bitcoin ETF market has become fierce. With giants like BlackRock's IBIT and Fidelity's FBTC already positioned, and Morgan Stanley gaining an advantage with lower fees, if Truth Social launches a 14th similar spot BTC ETF, the market space it can capture will be extremely limited.

Seyffart's pointed question hits the mark: "Does the market really need a 14th spot Bitcoin ETF?"

40 Act route: Truth Social remains in the game

However, withdrawal does not mean Truth Social is abandoning its crypto plans.

Seyffart observed that Yorkville still seems to plan to leverage the "Investment Company Act of 1940" (40 Act) fund structure to introduce more flexible crypto-related ETF strategies. Compared to the pure spot trust structure under the 33 Act, 40 Act funds allow for asset allocation and structured product design, theoretically enabling the creation of more differentiated crypto products.

Seyffart's assessment is: homogeneous spot BTC ETFs are no longer attractive, but "more differentiated products still hold value." This suggests that Truth Social's ambitions for crypto ETFs may not be extinguished, just taking a different route.

The red ocean is settled, the second-generation crypto ETF battlefield shifts

The competitive landscape for spot Bitcoin ETFs has entered a new equilibrium after MSBT's 14 basis points pricing: fees are near the floor, and the first movers' scale advantage is established, making it difficult for latecomers to break through with similar products.

From BlackRock executives publicly stating they will not issue "complex" crypto ETFs, to VanEck and Grayscale actively updating their altcoin ETF applications, market resources are shifting toward differentiated tracks. Truth Social's decision to withdraw its spot BTC application at this time and retain flexibility under the 40 Act is less about regulatory hurdles and more a pragmatic strategic shift.