Grayscale Investments’ chief executive officer said the firm will trim the management fee on its flagship spot bitcoin ETF, which had its biggest single-day outflow since it launched in early January.
CEO Michael Sonnenshein told CNBC on Monday that the expense ratio on the $26.4 billion Grayscale Bitcoin Trust (GBTC) will be reduced “over time, as this market matures.” GBTC, the largest of the recently approved spot bitcoin exchange-traded funds, on Monday had its largest single day outflow—$643 million—since it began trading.
The fund’s 1.5% fee is the highest among the 10 spot bitcoin ETFs that hit the market Jan. 11. GBTC converted from a closed-end trust into an ETF, the only one among the pack of new ETFs to begin trading with billions in assets.
While Sonnenshein didn’t provide a time frame for cutting the fee, pressure to do so is building. Rival firms are raking in billions as they reduce their management fees or remove them entirely for certain periods of time or until asset targets are reached. Grayscale’s fee, at six times that of BlackRock Inc.’s iShares Bitcoin Trust (IBIT), is a contributing factor in the roughly $12 billion that’s departed from the fund since it converted to an ETF.
“Typically when products are earlier in their lifecycle, when they’re new to be introduced, these [fees] tend to be higher,” Sonnenshein told CNBC. “As those markets mature, and as those funds grow, those fees tend to come down, and we expect the same to be true of GBTC.”
GBTC and Bitcoin’s Falling Price
The statements come as bitcoin sank below $63,000 in early Tuesday trading, down more than 6% over the past 24 hours. It’s slid 12% since last week when the largest cryptocurrency by market value soared to an all-time high above $73,500, according to crypto data provider CoinMarketCap.
While BlackRock and other competitors such as Bitwise Asset Management and Fidelity Investments have brought in fresh investors with fee waivers and reduced expense ratios, Grayscale previously voiced its commitment to its 1.5% expense ratio.
As GBTC has bled investors, the other nine, newly minted spot bitcoin ETFs have been raking in cash. IBIT has surged to the top of the heap among the new products, with nearly $16 billion in assets, thanks to fee cuts and BlackRock’s position as the world’s biggest ETF issuer.
Franklin Templeton, Bitwise Asset Management, Ark Invest, Valkyrie, and others have all completely waived fees for the first few months or until the ETFs reach a certain number of assets.
Mini GBTC
The firm is also vying to give investors a lower cost option in its proposed Grayscale Bitcoin Mini Trust that it announced it filed for with the SEC last week. This ETF, if approved, would trade under the ticker BTC, and carry a lower fee compared to its older, larger counterpart.
The firm said the Mini Trust would have a “materially lower fee than GBTC” by its structure as a spinoff from GBTC. Shares of GBTC will be used to seed the new ETF “with shares of the new Grayscale Bitcoin Mini Trust being distributed pro rata to GBTC shareholders,” the firm said in a statement.
Additional reporting from James Rubin. Contact Lucy Brewster at lucy.brewster@etf.com.