In less than five months, the iShares Bitcoin Trust (IBIT) has become the largest spot bitcoin ETF in the U.S. by assets under management (AUM), surpassing the Grayscale Bitcoin Trust (GBTC).
AUM for IBIT totaled $19.68 billion on Tuesday, more than the $19.65 billion for GBTC, according to data from Bloomberg.
IBIT assumed the No. 1 position despite GBTC’s $28.5 billion head start when 10 spot bitcoin ETFs began trading in the U.S. on January 11. GBTC had been available through private placements since 2013 and publicly on over-the-counter markets since 2015.
The trust amassed as much as $43.6 billion in AUM at its peak in November 2021, when the price of bitcoin first topped $67,000.
For much of its history, GBTC was open for creations—new shares—through private sales, but it never offered redemptions. Creations were eventually stopped, effectively turning GBTC into a closed-end fund.
Without a mechanism to keep GBTC’s market price close to the value of its underlying assets, the trust’s discount to net asset value (NAV) ballooned to as much as 49% in Dec. 2022. It remained as high as 44% in June of 2023, before BlackRock signaled that spot bitcoin ETFs might be a possibility by filing for what became IBIT.
GBTC’s discount narrowed over the next seven months, eventually reaching zero when it converted into an ETF this January.
Massive Outflows
But the ETF’s sky-high 1.5% expense ratio was a major turn-off for investors.
Since its conversion they have pulled $17.7 billion from the fund. Meanwhile, they have pushed $16.5 billion into IBIT, which has a much lower 0.25% expense ratio.
To staunch the bleeding of assets and better compete with other spot bitcoin ETFs, Grayscale announced in March that it would be launching a cheaper version of GBTC called the Grayscale Bitcoin Mini Trust (BTC).
BTC would initially be offered as a spin-off to existing holders of GBTC.
“A certain amount of the Bitcoin underlying GBTC would be utilized to ‘seed’ the new Grayscale Bitcoin Mini Trust, with shares of the new Grayscale Bitcoin Mini Trust being distributed pro rata to GBTC shareholders as of the record date, subject to appropriate regulatory approvals,” Grayscale said in March.
The new ETF will have an expense ratio of 0.15%, according to SEC filings, making it the cheapest spot bitcoin ETF on the market.
The debut of a cheaper version of an existing strategy allows Grayscale to maintain GBTC as a cash cow that spits off hundreds of millions of dollars in revenues, while still potentially participating in the growth of cryptocurrency ETFs more broadly.
In 2012, BlackRock made a similar move when it opted to start the iShares Core MSCI Emerging Markets ETF (IEMG) rather than cutting the expense ratio on the existing iShares MSCI Emerging Markets ETF (EEM).