• Grayscale experiences a record prolonged outflow caused by higher fees forcing investors to migrate to rival ETFs. 

• Grayscale CEO assures a possible fee reduction as the market matures, and claims the Fund has started to reach a little equilibrium. 

The tide of assets fleeing the Grayscale’s Bitcoin Trust (GBTC) Fund sets an unprecedented prolonged record of 72 days, appearing to be in stark contrast to the nine other approved spot Bitcoin ETFs. This has been the case since the conversion was first approved but slowed a little down on February 26 with a record-low outflow of $22.4 million from the $640 million witnessed in January.

As of that time, GBTC had recorded 31 days of consecutive outflows totalling $7.47 billion since January 11. Industry experts have linked the continuous outflow to the aftermath of the bankruptcy filings by several crypto firms in 2022 and 2023 which had GBTC shares on their balance sheets. 

According to Michael Sonnenshein, CEO of Grayscale Investments, the current situation is caused by the shift in investors’ behaviour marked by the selling off of their GBTC to reinvest in other Bitcoin ETFs. Interestingly, this is driven by the lower fees of competitors such as BlackRock and Fidelity as earlier reported by Crypto News Flash (CNF). Research reveals that GBTC initially issued a fee of 1.5% higher than the average charges of 0.2% issued by competitors.

Interestingly, the Grayscale executives went the extra mile to defend the fees, claiming its legacy and management of trust justifies the charges. 

Investors weigh heavily things like liquidity and track record and who the actual issuer is behind the product. Grayscale is a crypto specialist. And it has paved the way for many of these products coming through…I think from our standpoint, it may at times call into question their long-term commitment to the asset class.

Grayscale to Lower Fees to Stay Competitive

Sonnenshein earlier took a dig at the other ETFs, claiming their lower fees are meant to attract investors since they have no track record. Predicting their future existence, the Grayscale CEO stated emphatically that two to three of the spot Bitcoin ETFs may “obtain some critical mass” of Asset Under Management, but the rest may find it prudent to pull out of the market. However, the current market situation speaks otherwise. 

Confirming this is Arkham Intelligence data reviewed by CNF. The data estimates 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. To be able to stay competitive, Sonnenshein has assured that Grayscale might lower fees and rapidly attract substantial assets as the market matures. For now, he believes that the Fund has started to reach a little bit of equilibrium.

We do believe that the fund has started to reach a little bit of an equilibrium where some of those anticipated outflows, whether it was some of the bankruptcy selling, some investors perhaps undertaking switch trades, (are) largely behind us.

Currently, the future of ETFs remains uncertain as Bitcoin flips into a bearish phase with the price trading at $64,428 at press time after falling by 0.4% in the last seven days and 7% in the last 24 hours. Fortunately, the buying momentum in response to the just completed Bitcoin halving could provide enough support to hold the price above $60K.  

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