The 'fee differential' between Grayscale's spot bitcoin ETF and competing funds is 'too steep' to ignore, says Nate Geraci, president of the ETF Store
BlackRock is vying for the most assets managed by exchange-traded funds that track bitcoin prices, making a quick ascension to challenge the dominance of Grayscale Investments.
Soon after spot bitcoin ETFs made their debut in January, Grayscale loomed large with roughly $24 billion of assets under management in its Grayscale Bitcoin Trust - but outflows from its giant ETF were already underway. Grayscale started at the top of the rankings for assets as it converted its existing bitcoin fund into an ETF the same day that competing spot bitcoin ETFs listed following approval from the Securities and Exchange Commission.
The Grayscale Bitcoin Trust ETF GBTC had about $19.8 billion of assets under management as of May 28, according to data on Grayscale's website. BlackRock's much less expensive iShares Bitcoin Trust IBIT managed about $19.6 billion of assets as of the same date, according to data on BlackRock's website.
The "fee differential" between the Grayscale Bitcoin Trust ETF and other exchange-traded funds tracking spot prices of the cryptocurrency is "simply too steep for advisers and investors to ignore," said Nate Geraci, president of the ETF Store, in a phone interview Wednesday.
The iShares Bitcoin Trust has attracted massive inflows, putting BlackRock next to Grayscale in being well ahead of the spot bitcoin ETF competition based on assets under management.
The Fidelity Wise Origin Bitcoin Fund FBTC ranks as the third-largest, with around $11.2 billion of assets under management, followed by the ARK 21 Shares Bitcoin ETF ARKB at $3.3 billion and Bitwise Bitcoin ETF Trust BITB at $2.5 billion, according to FactSet data as of May 28.
Meanwhile, Grayscale Bitcoin Trust has seen around $17.5 billion of outflows so far this year, including over the past week and month, according to FactSet data as of May 28. By contrast, the iShares Bitcoin Trust has attracted massive inflows, raking in about $16.4 trillion, according to FactSet data.
Spot bitcoin ETFs that compete with Grayscale's fund are cheaper.
BlackRock, Fidelity and Bitwise offered fee waivers for investors after launching their funds.
For example, Fidelity says on its website that it's waiving the fee to invest in its spot bitcoin ETF until Aug. 1. BlackRock's website shows that it was waiving a portion of its fee for the first $5 billion of assets during the 12 months since its first day of trading on Jan. 11. Bitwise indicates on its website that it was waiving the entire fee for the first $1 billion of assets until July 11.
Spokespeople for Grayscale didn't immediately respond to emails seeking comment on outflows from its spot bitcoin ETF this year.
If Grayscale had slashed fees on its bitcoin fund to the same level as rival ETFs, the firm would have lost "substantial revenue," said Geraci. "I do think that GBTC will continue to bleed" assets, he said, referring to the ticker of the firm's spot bitcoin ETF.
The Grayscale Bitcoin Trust is a significant portion of the firm's overall assets, which the firm pegged at around $30 billion in announcement earlier this month about its new chief executive.
But Geraci also said that some investors may stay with the ETF because selling would created a major tax event after prices of bitcoin surged.
Bitcoin (BTCUSD)was trading around $67,204 on Wednesday afternoon, according to CoinDesk data. That's well above levels seen late last year.
Shares of the Grayscale Bitcoin Trust have jumped around 47% since Jan. 11, while the iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund are each up around 44% since then, based on Wednesday afternoon trading levels, according to FactSet data.
The "wild card" for Grayscale is the mini version of its spot bitcoin ETF that it's planning to launch, said Geraci. "I expect them to price that extremely competitively," potentially undercutting rival funds and providing the firm a way to compete long-term for assets, he said.
-Christine Idzelis
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