BlackRock is currently competing with Grayscale Investments to manage the largest amount of assets through exchange-traded funds (ETFs) that track bitcoin prices. Despite Grayscale’s initial dominance with approximately $24 billion in assets under management through its Grayscale Bitcoin Trust, there have been significant outflows from its ETF. Grayscale quickly rose to the top of the rankings as it converted its existing bitcoin fund into an ETF on the same day that competing spot bitcoin ETFs were approved by the Securities and Exchange Commission and listed. As of May 28, the Grayscale Bitcoin Trust ETF had around $19.8 billion of assets under management, while BlackRock’s more cost-effective iShares Bitcoin Trust managed approximately $19.6 billion of assets.
In a phone interview on Wednesday, Nate Geraci, president of the ETF Store, highlighted the significant “fee differential” between the Grayscale Bitcoin Trust ETF and other exchange-traded funds that track the spot prices of the cryptocurrency. Geraci emphasized that this difference is too substantial for advisers and investors to overlook.
The iShares Bitcoin Trust has experienced a tremendous influx of investments, placing BlackRock alongside Grayscale as leaders in the spot bitcoin ETF market in terms of assets under management.
According to FactSet data as of May 28, the Fidelity Wise Origin Bitcoin Fund ranks as the third-largest, managing around $11.2 billion in assets. It is followed by the ARK 21 Shares Bitcoin ETF with $3.3 billion and the Bitwise Bitcoin ETF Trust with $2.5 billion.
According to FactSet data as of May 28, there have been outflows of approximately $17.5 billion from Grayscale Bitcoin Trust this year, including the past week and month. In contrast, iShares Bitcoin Trust has experienced significant inflows, attracting around $16.4 billion.
Compared to Grayscale’s fund, spot bitcoin ETFs are more cost-effective. The fee percentages for various spot bitcoin ETFs are as follows:
- iShares Bitcoin Trust: 0.25%
- Fidelity Wise Origin Bitcoin Fund: 0.25%
- ARK 21Shares Bitcoin ETF: 0.21%
- Bitwise Bitcoin ETF Trust: 0.2%
Data taken from the websites of each ETF issuer.
After launching their funds, BlackRock, Fidelity, and Bitwise have offered fee waivers to investors.
For instance, Fidelity has announced that it will not charge any fee for investing in its spot bitcoin ETF until August 1st. On the other hand, BlackRock has indicated on its website that it will waive a portion of its fee for the first $5 billion of assets during the 12-month period starting from its first day of trading on January 11th. Similarly, Bitwise has stated on its website that it will waive the entire fee for the first $1 billion of assets until July 11th.
However, representatives from Grayscale have not responded to emails requesting comments on the outflows from its spot bitcoin ETF this year.
According to Geraci, if Grayscale had reduced the fees on its bitcoin fund to match those of its competitors, the company would have incurred significant revenue losses. He believes that assets will continue to flow out of GBTC, the ticker symbol for Grayscale’s spot bitcoin ETF.
The Grayscale Bitcoin Trust makes up a significant portion of the firm’s total assets, which were estimated to be around $30 billion in a recent announcement about its new CEO. However, some investors may choose to hold onto the ETF due to potential tax implications from selling, especially considering the recent surge in bitcoin prices. As of Wednesday afternoon, bitcoin was trading at approximately $67,204, well above levels seen at the end of last year. According to FactSet data, shares of the Grayscale Bitcoin Trust have increased by about 47% since January 11, while the iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund have risen by approximately 44% during the same period.
According to Geraci, the mini version of Grayscale’s spot bitcoin ETF is a potential game-changer for the company. He anticipates that the pricing of this product will be highly competitive, allowing Grayscale to potentially outperform rival funds and establish itself as a long-term player in asset management.