On Friday, Grayscale Investments revealed that in the last two quarters, its flagship Bitcoin fund has seen its holdings decline by more than 348,000 BTC tokens.
This is because investors have opted to move to other funds. According to current prices, this is a valuation of about $22.4 billion.
The Decline
In January, Grayscale Bitcoin Trust (GBTC) was converted into a spot Bitcoin ETF, as other products were also approved. Before that, the fund’s total holdings stood at 620,000 Bitcoins.
According to a filing with the Securities and Exchange Commission (SEC), Grayscale revealed that this number of BTC tokens has dropped to 276,000.
This means that in the last six months, Grayscale has seen its BTC stash record a decline of 55%. Meanwhile, other asset managers have come up with investment vehicles.
The value of Bitcoin held by GBTC had been $26.3 billion before the outflows, but it has now plunged to $17 billion. A management fee is applicable on investors for holding spot Bitcoin ETFs.
As compared to other options in the market, GBTC seems to have the highest management fee. On Wednesday, Grayscale had also introduced a Mini Trust.
This is essentially a spin-off of GBTC, which offers a reduced management fee to investors. It is lower than its competitors, with Franklin Templeton’s spot Bitcoin ETF being the closest.
The Charges
The Grayscale Mini Trust has a management fee of about 0.15%. As for the spot Bitcoin ETF from Franklin Templeton, it has a management fee of 0.19%.
GBTC’s management fee is about 1.5%. This is after Grayscale reduced the fee from 2% in the run-up to its conversion to a spot Bitcoin ETF.
It was aimed at appealing to investors who were looking for a cheaper investment product. BlackRock’s ETF has managed to record inflows of $20 billion.
As for Fidelity’s ETF, it has seen inflows of $10 billion. In comparison, GBTC has recorded net outflows of about $19 billion.
In January, when spot Bitcoin ETFs had been launched, the price of Bitcoin had stood at $46,000.
The Impact
Since the price of Bitcoin rose, it meant that the change in its value was not as prominent as the change in its BTC holdings.
GBTC saw an outflow of more than half of the Bitcoin tokens it held at the beginning of 2024. However, the last two quarters saw only a 35% decline in its value.
Initially, the GBTC outflows had dominated the conversation related to spot Bitcoin ETFs. This is because the outflows outweighed the inflows to other products.
Since it had been a closed-end fund, it had not been possible for investors to redeem their shares in GBTC.
They could only sell their shares in a secondary market. In 2022, its discount to net asset value had climbed to 48%.
This year also saw a substantial number of GBTC shares sold by collapsed crypto companies, such as FTX and Genesis, as part of their bankruptcy proceedings.
While the outflows have certainly slowed down over time, it is worth noting that GBTC has only seen positive inflows for 12 days since it was converted into a spot Bitcoin ETF.