Although Grayscale has not revealed the specific details of the fee structure for the new fund, analysts expect it to be significantly lower than GBTC’s current fee.
Grayscale Investments, the manager of the oldest and most popular Bitcoin fund, the Grayscale Bitcoin Trust (GBTC), is taking a crucial step to maintain its dominant position in the growing market of Bitcoin exchange-traded funds (ETFs). The company filed a request with the US Securities and Exchange Commission (SEC) on Tuesday to launch the Grayscale Bitcoin Mini Trust, a new fund derived from GBTC but with significantly lower fees.
According to the S-1 document, the Grayscale Bitcoin Mini Trust will be created through a corporate process known as a “Spin-Off”, where an existing company divides part of its operations, assets, and/or liabilities to create a new independent company. This will allow them to transfer part of GBTC’s current bitcoin holdings to the new fund, giving shareholders a stake in the new fund.
Additionally, being created as a Spin-Off, the new fund would enable current GBTC holders to diversify their exposure to Bitcoin without having to pay taxes on capital gains, a key consideration for many long-term investors.
Grayscale Aims to Maintain Leadership among Newly Created Bitcoin ETFs
This move comes in response to intense competition from recently approved spot bitcoin ETFs offered by Wall Street giants like BlackRock and Fidelity, which have attracted many investors due to their more attractive fee structures.
Although Grayscale has not revealed the specific details of the fee structure for the new fund, analysts expect it to be significantly lower than GBTC’s current fee. Eric Balchunas, an ETF analyst at Bloomberg, explained on Twitter that this move by Grayscale is an attempt to halt the massive exodus of investors from GBTC to other cheaper bitcoin ETFs. He noted that current GBTC investors feel “trapped” paying the high 1.5% annual fees, while BlackRock, Fidelity, and other new bitcoin ETFs charge only between 0.2% and 0.3% (20-30 basis points).
“To stop the exodus. My guess is they’re really hearing it from GBTC investors trapped in there paying 1.5% while everyone else pays 20-30bps. This is a way to satiate those investors and perhaps attract new ones. iShares invented this move w/ IEMG vs EEM when EEM was getting Vanguard-ed,” said Balchunas.
Bitcoin ETFs Become Wall Street’s Most Coveted Products
Since GBTC converted to a Bitcoin ETF in January, the fund has experienced net outflows of over $10 billion by redeeming over 229,000 BTC. BlackRock and Fidelity ETFs continue to grab Wall Street’s attention, accumulating a combined total of 332,000 BTC.
As reported by Coinspeaker, BlackRock’s spot Bitcoin ETF (IBIT) has become one of the top three ETFs in the US by inflows in February. IBIT recorded inflows of over $500 million between February 27 and 29, reaching a daily record of $612 million on February 28. This brought its total flow for the year to $7.750 billion, making it the third-largest ETF by flows in the US, surpassed only by the iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 ETF (VOO).
Therefore, as the cryptocurrency ETF landscape continues to evolve, strategies like this could be crucial for fund managers to maintain their relevance and competitiveness in an increasingly saturated market.
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