New king. The Grayscale Bitcoin Trust (GBTC) was initially established in 2013 and launched as the largest spot BTC ETF in terms of assets under management thanks to a decade-long head start that saw it accumulate nearly 30 billion dollars in BTC. Yesterday, the reign of GBTC came to an end. Which ETF has taken its place and what conclusions can we draw from this development?
GBTC had been the primary means for TradFi participants to access BTC exposure for much of Bitcoin's existence, but fell into decline after the long-awaited launch of spot BTC ETFs, which ultimately enabled redemptions in mid-January.
Although GBTC trading activity dominated BTC ETF spot volumes for several weeks following the conversion, the instrument was plagued by outflows during this period, consistently losing hundreds of millions of dollars in BTC daily.
By the end of April, these persistent outflows had largely subsided, and over the course of May, GBTC managed to record 6 separate days of inflows!
While this recent period of relatively stable flows has undoubtedly been a comforting respite for Grayscale, it has proven insufficient to allow GBTC to maintain its market share lead… March 28, BlackRock IBIT iShares Bitcoin Trust – the golden child among recently launched spot ETFs – has finally overtaken GBTC in terms of assets under management!
Despite GBTC's huge lead in newborn products by 2024, this reversal was inevitable, reinforced by the presence of GBTC's equally scandalous pricing structure and the increasing institutionalization of BTC.
Grayscale has chosen to maximize the value of GBTC's fee-generating capabilities, explaining that many holders will not sell due to tax implications and other factors. It has thus adopted extremely aggressive management fees of 1.5%, six times higher than those of alternative BTC spot ETFs!
While grayscale plans With the upcoming launch of a low-fee alternative mini BTC ETF, the desire to maximize GBTC revenue simply left the product uncompetitive with existing offerings.
Additionally, while Grayscale has influence among crypto natives, the group is relatively unknown among TradFi participants and does not have the same degree of client connections as billion-dollar asset managers like BlackRock and Fidelity.
External capital flowing into crypto is attracted to instruments backed by established names, and it is entirely rational for them to avoid GBTC in favor of newer instruments like IBIT, given the exorbitant management fees of the former and its below-average liquidity compared to leading alternatives.
JUST IN: The BlackRock spot #Bitcoin ETFs $IBIT surpasses GBTC to become the largest Bitcoin ETF in the world. pic.twitter.com/b9hgfZLmY7
– Bitcoin Magazine (@BitcoinMagazine) May 29, 2024