Grayscale Remains Unaffected by the Bitcoin ETF Fee Battle
In an interview with CNBC, Michael Sonnenshein discussed the ongoing fee war surrounding Bitcoin ETFs and the future of Grayscale Bitcoin Trust (GBTC) as the ETF market continues to grow.
During the process of approving and launching spot Bitcoin ETFs, most issuers attempted to attract the public’s interest by offering very low management fees. Issuers have also engaged in extensive promotion of their ETFs on various platforms in order to attract retail investors.
These asset managers have utilized Google ad campaigns, mainstream media advertisements, and a strong presence on social media to compete with each other.
However, despite the fee war being a major incentive for attracting new clients, Grayscale has not participated in this battle. Recently, asset manager VanEck announced a fee waiver as its latest strategy after falling behind its competitors.
The GBTC currently has a 1.5% management fee, which is the highest among its competition. However, Sonnenshein stated in the CNBC interview that GBTC will eventually reduce its fees:
I can confirm that over time, as this market matures, the fees on GBTC will decrease.
Sonnenshein further explained that during the early stages of a product’s lifecycle, maintenance fees tend to be higher. However, as markets mature and funds grow, fees tend to decrease. This is expected to be true for GBTC as well.
Despite not participating in the fee war, Grayscale has filed for a new investment product called “Grayscale Bitcoin Mini Trust.” This product would transfer some of the fund’s BTC to the Mini Trust and is expected to have lower costs than GBTC while operating independently.
Sonnenshein mentioned that “all of these new issuers came into the market to compete with us” while also competing with each other.
GBTC Continues Despite $12 Billion in Outflows
Grayscale’s victory against the Securities and Exchange Commission (SEC) paved the way for the approval of spot Bitcoin ETFs in the US. However, since the trust converted into an ETF in mid-January, Grayscale has seen over $12 billion in capital outflows despite managing $26 billion through GBTC.
During the interview, Sonnenshein acknowledged that they anticipated outflows. While high fees account for a significant portion of these liquidations, the CEO listed several reasons that could explain the large numbers:
Investors wanting to take gains on their portfolio, arbitragers exiting the fund, or people unwinding positions due to bankruptcies and forced liquidations.
The substantial liquidations did not come as a surprise. However, Sonnenshein believes that these outflows have contributed to GBTC’s performance and sees it as just the beginning of a longer game.
We’re at the end of the first inning now, where we hope the pent-up demand for buying and selling has been satisfied.
Sonnenshein remains optimistic about the future of GBTC, stating that they are moving towards the second and third innings. He believes there is still a lot of untapped market potential, as many potential investors have yet to access these investment products.
By
By
By
By