Grayscale witnesses an unprecedented outflow of funds as investors migrate to rival ETFs due to higher fees. The CEO of Grayscale, Michael Sonnenshein, assures investors that fees may be reduced as the market matures and claims that the Fund is starting to find some equilibrium.
The outflow of assets from Grayscale’s Bitcoin Trust (GBTC) Fund has set a new record, lasting for 72 days, which is in stark contrast to the nine other approved spot Bitcoin ETFs. Although the outflow slowed down on February 26, with a record-low of $22.4 million compared to the $640 million in January, GBTC has recorded 31 consecutive days of outflows totaling $7.47 billion since January 11. Experts believe that this continuous outflow is a result of the bankruptcy filings of several crypto firms in 2022 and 2023, which held GBTC shares on their balance sheets.
According to Sonnenshein, the shift in investor behavior, marked by the selling off of GBTC shares to reinvest in other Bitcoin ETFs, is the cause of the current situation. This is driven by the lower fees offered by competitors such as BlackRock and Fidelity, as mentioned in a report by Crypto News Flash. Research shows that GBTC initially charged a fee of 1.5%, which is higher than the average fee of 0.2% charged by competitors.
Grayscale executives defend the fees, stating that their legacy and management of trust justify the charges. They believe that investors consider factors such as liquidity, track record, and the issuer behind the product. Grayscale, being a crypto specialist, has paved the way for many of these products. However, they acknowledge that their fees may at times raise questions about their long-term commitment to the asset class.
To stay competitive, Sonnenshein suggests that Grayscale may lower fees and attract substantial assets as the market matures. He predicts that two to three of the spot Bitcoin ETFs may gain significant Asset Under Management, while the rest may exit the market. However, the current market situation contradicts this prediction.
Data from Arkham Intelligence supports the current market situation, estimating that GBTC holds more than 323,209K BTC ($22.29 billion), a significant decrease from the 618,000 BTC held at the beginning of the year. Sonnenshein believes that the Fund has started to find some equilibrium, with anticipated outflows largely behind them.
The future of ETFs is uncertain as Bitcoin enters a bearish phase, with the price currently at $64,428. However, the buying momentum resulting from the recent Bitcoin halving may provide enough support to keep the price above $60K.
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