Bitcoin ETF Sell-Off May Be Slowing Down, Says Grayscale CEO
The tide may be turning for Grayscale Bitcoin Trust (GBTC), the world's largest Bitcoin investment vehicle. After months of significant outflows, Grayscale CEO Michael Sonnenshein suggests they might be nearing equilibrium.
This news comes amidst a fierce battle for dominance in the newly launched Bitcoin ETF market. The U.S. Securities and Exchange Commission's (SEC) approval in January opened the door for rival issuers, leading to an outflow of over $15 billion from GBTC in the past three months. However, Bitcoin's price surge has cushioned the blow, keeping Grayscale's assets under management at a healthy $23.13 billion.
Bankruptcy Fallout and Investor Swapping Drive Outflows
Sonnenshein attributes some of the outflows to specific events. Crypto companies filing for bankruptcy in 2022 and 2023 often held GBTC shares and sold them to repay creditors. Additionally, some investors swapped their GBTC holdings for newer, lower-fee Bitcoin ETFs launched by competitors like BlackRock.
Grayscale Eyes the Future: Innovation and Fee Reduction
While daily outflows are nowhere near the peak of $600 million witnessed in March, they remain negative. Looking forward, Grayscale prioritises attracting new investors and innovating its products. They might take steps to compete with rivals offering lower fees, like BlackRock's iShares Bitcoin Trust with a 0.12% fee.
Grayscale has already initiated this strategy by seeking SEC approval for a new, lower-fee "Bitcoin Mini Trust." This product aims to address their current 1.5% management fee, significantly higher than the industry average of 0.25%.
Sonnenshein anticipates GBTC's fees to decrease over time as the market matures.
Bitcoin Price Soars, Grayscale Pushes for Spot Ether ETF
The approval of Bitcoin ETFs has coincided with a strong performance for Bitcoin itself, with a price increase exceeding 60% this year.
Grayscale is also looking beyond Bitcoin. They are seeking SEC approval to convert another product into a spot Ether ETF. A decision on their application, and similar ones from competitors, is expected by late May. Notably, Grayscale sued the SEC after their initial spot Bitcoin ETF application was rejected in 2022. An appeals court victory forced the SEC to re-evaluate, paving the way for the recent wave of Bitcoin ETF approvals. Grayscale remains optimistic about the SEC's approval of additional spot ETFs, including their own for Ether.
