Grayscale Investments, the issuer of one of the recently approved spot Bitcoin exchange-traded funds (ETFs) in the United States, reported flat revenue in the first quarter of the year due to its decision to keep fees on its flagship ETF Grayscale Bitcoin Trust (GBTC). ).
Grayscale exceeds expectations despite cash outflows
According to According to a letter to shareholders from its parent company, Digital Currency Group (DCG), the operator of the Grayscale Bitcoin Trust reported revenue of $156 million, showing little change from the previous quarter.
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Since converting the GBTC trust into an ETF in January, Grayscale has seen exits of around $17.4 billion, as investors appear to have shifted their assets to new, less expensive funds offered by BlackRock and Fidelity, leaders in the U.S. ETF race in terms of inflows recorded since January.
While GBTC charges 1.5% management fees, many of its competitors charge less than 0.3%, leading to capital outflows. In response, Grayscale announcement plans in March to seek approval from the Securities and Exchange Commission (SEC) to spin off some of Grayscale's assets into a new, low-fee “Bitcoin Mini Trust.”
Despite the cash outflows, first-quarter revenue attributable to GBTC exceeded Grayscale's expectations. The company had previously anticipated outflows due to increased ETF competition. Grayscale previously charged a 2% sponsorship fee before the trust conversion.
The stable revenues were also attributed to higher average prices of Bitcoin and Ethereum and a decrease in assets under management (AT M).
In contrast to Grayscale's performance, all US spot Bitcoin ETFs have seen a total net inflow of over $11 billion so far. However, demand for these ETFs has declined recently amid tightening financial conditions in the United States, where the Federal Reserve (Fed) faces the challenge of combating persistent inflation.
DCG reports 11% increase in first quarter revenue
Digital Currency Group, founded by Barry Silbert and the head quarter of Grayscale, reported an 11% quarter-over-quarter increase in first-quarter revenue to $229 million, primarily due to rising asset prices.
However, revenue growth has lagged behind Bitcoin's price appreciation, which increased by more than 60% during the same period. In its letter, DCG attributed this disparity to lower GBTC sponsor fees, buybacks and stable mining revenues from its subsidiary Foundry.
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Foundry, DCG's mining subsidiary, saw a 35% sequential revenue increase, propelled by revenue from staking and equipment sales. Meanwhile, Luno, the company's director crypto exchange subsidiary, experienced a 46% increase in sales from one quarter to the next, driven by a significant increase in trading volume.
At press time, Bitcoin is trading at $62,100 and has recently encountered significant price volatility. These price fluctuations failed to establish a stable position above crucial price thresholds.
Featured image from Shutterstock, chart from TradingView.com