Grayscale Investments has introduced a cheaper version of its Bitcoin fund known as the Grayscale Bitcoin Mini Trust to increase competition for crypto investor money.
The new fund, listed with a 0.15% expense ratio, is the cheapest US exchange-traded fund (ETF) that holds the digital asset excluding temporary discounts. This move comes after the reclassification of the ten years old Grayscale Bitcoin Trust into an ETF in the month of January which was a closed – ended fund.
Context of the Conversion and Competition
The transformation of the Grayscale Bitcoin Trust into an ETF happened at the same time as nine new Bitcoin ETFs launched by large companies such as BlackRock Inc., and Fidelity Investments. These entrants helped to shape the future of the crypto market and make Bitcoin available to the masses, skyrocketing its price to $73,798 in March. Given the competition, new ETFs have cut their fees to the bare minimum with some even introducing zero fee for a certain period.
The first Grayscale Bitcoin Trust which has a 1.5% fee has witnessed an outflow of about $19 billion since the time when it was converted into an ETF. Nevertheless, it is still second by the number of assets behind the BlackRock’s iShares Bitcoin Trust. Current shareholders of the Grayscale Bitcoin Trust will be issued with shares of the Grayscale Bitcoin Mini Trust in their accounts to the extent of their holding.
Market Reactions and Investor Sentiments
Grayscale Bitcoin Mini Trust is launched at a good time for investors, said Zach Pandl, head of research at Grayscale. Pandl pointed to several positives such as a predicted rate cut by the Federal Reserve as well as the focus on cryptocurrencies within the US Presidential race. He also mentioned that the possibility of a weaker dollar under some of the political plans could affect the investors’ portfolio.
The debuting of Bitcoin ETFs has brought in $17.7 billion in net inflows into the sector, making it the largest debut for a new fund category. Nonetheless, one cannot ignore the fact that there has been a large amount of redemptions from Grayscale Bitcoin Trust in particular within this context.
Approval of the SEC and Historical Background
The American regulatory agency SEC allowed spot-Bitcoin ETFs at the start of the year, in the wake of a court ruling in 2023 that nullified a case that was filed by Grayscale Investments LLC. The First Grayscale Bitcoin Trust was launched in 2013 and for a long time was the biggest Bitcoin instrument. It can be recalled that it was previously a closed end product and at times it traded at premiums or discounts to Net Asset Value. This therefore made Grayscale push for a conversion into an ETF in order to trade at par.
“GBTC is still going to be a very important part of the crypto landscape,” said Pandl.
He said that those investors who aim at trading volume and quotes spread, it will be probably more appropriate for them to consider the original Bitcoin Trust rather than the new Mini Trust.
After approving Bitcoin ETFs, ETFs that are linked to Ether, the second most popular cryptocurrency, were approved by the SEC and began trading in July. The Grayscale Ethereum Trust which is the largest for Ether also changed its structure from a closed-end fund to an ETF.
In this process, Grayscale launched the low-cost Ethereum Mini Trust through which it already received the net inflow of $181 million. At the same time, $1.8 billion has flowed out of the higher-fee Ethereum portfolio.
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