Grayscale CEO says GBTC Bitcoin ETF fees will come down over time

LONDON — The head of digital asset management firm Grayscale, which manages the $26 billion exchange-traded fund GBTC, says fees on its flagship product will fall over time after outflows hit $12 billion. Ta.

Grayscale CEO Michael Sonnenschein says crypto fund managers will reduce fees on the Grayscale Bitcoin Trust ETF in the coming months as the nascent crypto ETF market matures. He said he was looking forward to it.

“I’m happy to confirm that GBTC fees will go down over time as this market matures,” Sonnenschein told CNBC in an interview on Monday. The company has previously defended its higher-than-market-average rates.

“We’ve seen this in countless other exposures and in countless other markets. Typically, these things happen when a product is early in its lifecycle, when it’s newly introduced. not. [fees] tends to be higher. And as those markets mature and funds grow, fees tend to come down, and we expect the same to be true for GBTC. ”

According to data from crypto investment firm CoinShares, GBTC has recorded more than $12 billion in outflows since its conversion into an ETF in early January, due in no small part to higher-than-average fees. It becomes.

GBTC recorded its biggest single-day outflow on Monday, with total withdrawals totaling $643 million, according to CoinShares data.

“Of course we expected there to be a spill,” Sonnenschein told CNBC. “Investors either want to get a return on their portfolio, arbitrageurs coming out of the fund, or people unwinding positions that were part of the bankruptcy through forced liquidation.”

Market commentators claim that the bankruptcy of crypto giant FTX played a key role in GBTC’s decline. FTX was a major shareholder in GBTC until it filed for bankruptcy in November 2022, holding approximately 22 million shares as of October 25.

The FTX Bankruptcy Foundation reportedly sold a large portion of its stake in the Grayscale Bitcoin ETF, according to a January report from Bloomberg and CoinDesk.

“None of it was surprising,” Sonnenschein said of the leak. “What we have seen is that GBTC continues to trade liquidly with tight spreads with a very diversified shareholder base. So we are now in the first and second stages of this situation. I think it might be somewhere in between.”

“We’re kind of at the end of the first inning right now, where the pent-up buying demand will hopefully be met and the pent-up selling demand will hopefully be met,” Sonnenschein said. Probably,” he added.

“And now we’re starting to move towards that second and third round, where there are so many markets that haven’t yet accessed these products.”

The crypto fund manager charges GBTC holders a 1.5% management fee, which is significantly higher than the fees charged by many ETF providers such as BlackRock and Fidelity.

To attract deposits, VanEck is completely waiving fees for investors until March 2025.

Grayscale’s Sonnenshein defended the company’s high fees at the time, telling CNBC that they were justified by GBTC’s liquidity and track record. He said the reason other ETFs have lower fees is because the products “don’t have a track record” and issuers are trying to tempt investors with fee incentives.

Sonnenschein said other ETFs have lower fees because the products “don’t have a track record” and because issuers are trying to attract investors with fee incentives. “From our standpoint, I think there may be some questions about their long-term commitment to this asset class,” he said.

Sonnenschein told CNBC on Monday that “all of these new issuers have really come into the market to compete with us” and are rivals to each other.

Grayscale also has other ways to offer investors a low-cost way to access Bitcoin ETFs, including the Grayscale Bitcoin Mini Trust, a “mini” version of its flagship product announced last week. I’m thinking of introducing it. The new ETF will trade under the ticker “BTC” and will have significantly lower fees than GBTC.

The new BTC ETF will effectively be spun out of the Grayscale Bitcoin Trust ETF and will be seeded with a private portion of GBTC stock, the underlying asset of Bitcoin.

Under this structure, existing holders of GBTC can benefit from lower total blending fees while maintaining the same exposure to Bitcoin, spanning ownership of both GBTC and BTC shares. Masu.

Existing GBTC shareholders will also be able to convert to BTC without paying capital gains tax.

The company is currently awaiting approval from the U.S. Securities and Exchange Commission for its Bitcoin Mini Trust ETF.

Going forward, Sonnenschein hopes investors will look to the company’s other crypto investment products, which track the prices of various cryptocurrencies such as Ether and Solana.

The company is converting the Grayscale Ethereum Trust into an ETF, but is awaiting SEC approval.

Correction: This article has been corrected to reflect that VanEck has waived fees for Bitcoin ETFs until March 2025. Previous versions incorrectly listed the company name.