Grayscale’s once-mighty fund is bleeding bitcoin

livemint.com:

For years, the Grayscale Bitcoin Trust was one of the few ways to bet on bitcoin without buying the cryptocurrency itself. Now, with the sector awash in lower-cost competing funds, investors are fleeing the exchange-traded fund. GBTC, as the trust is known for its ticker symbol, remains the world’s largest bitcoin fund thanks to the recent surge in crypto prices.

But its assets have shrunk by more than half from their peak in November 2021, in large part because the trust charges a 1.5% fee while bitcoin funds offered by BlackRock, Fidelity Investments and others charge next to nothing. Investors have yanked a net $16 billion from GBTC since Jan. 11, when it converted from a trust into an ETF following U.S.

approval of sales of bitcoin funds. Over the same period, the nine competing ETFs launched by mostly large asset managers have taken in nearly $29 billion. Yet Grayscale has resisted a significant fee cut, insisting that rising bitcoin prices will continue to buoy its fortunes.

Given bitcoin’s 43% advance this year and the currency’s long history of boom-bust cycles, it isn’t a bet that everyone is comfortable with. “If this pace of outflows continues without a material jump in the price of bitcoin even for another couple of months, they are in a tough spot," Steven Lubka, head of private client services at investment firm Swan Bitcoin, said of GBTC. Michael Sonnenshein, the chief executive of Grayscale Investments, said he isn’t worried about the investor exodus.

He has previously defended GBTC’s higher fee as warranted given what he said were its advantages relative to competitors, such as easier trading. “Over time, I do believe that as the market matures, GBTC’s fee will come down," he said. Behind the erosion of