Digital asset investment manager Grayscale’s CEO Michael Sonnenshein has shared an interesting update regarding the company’s spot Bitcoin exchange-traded funds (ETFs). According to a report on Reuters, Sonnenshein has said that he sees Grayscale’s Bitcoin ETF outflows reaching an equilibrium. He mentioned this in a recent episode of Inside ETFs.
Grayscale has battled hard to stay on top of the pile in the Bitcoin ETF market since the United States Securities and Exchange Commission (SEC) approved the firm and some others in January. This approval came after a decade-long battle between companies and the agency before the approval for firms to list the investment products. According to BitMEX research, Grayscales Bitcoin Trust (GBTC) has experienced a huge outflow of over $15 million. However, the recent surge in the price of BTC has helped lessen the dent in its assets under management (AUM) which is now at $23.13 billion.
Sonnenshein noted that the fund is now moving close to an equilibrium level. “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,” he said. The Grayscale CEO clarified that some of the outflows were connected to the settlement of bankruptcy of FTX and other firms. Furthermore, he noted that some investors are selling the Grayscale ETF and immediately buying another.
Challenges in the Bitcoin ETF market
The majority of the companies that were caught in the cold waters of bankruptcy in 2022 and 2023 took on shares of Grayscale’s previous trust. With the product already converted to an ETF, most of them are taking out funds to pay their creditors. However, the full flow data does not reflect this. Although the daily outflow in March was far from its previous $600 million line, there are still in the red. According to BitMEX research, Grayscale saw outflows of about $303 million and $155 million on Monday and Tuesday, respectively.
Moving forward, Sonnenshein thinks it will be ideal to woo more clients into the ecosystem while the firm continues to develop its products. The Grayscale CEO concedes that the firm might have to look for ways to sustain the competition between the firm and other Bitcoin ETF firms. One of the few ways to actualize this is to reduce its much higher fees compared to other firms. In context, BlackRock Bitcoin Trust charges a fee of 0.12% and has enjoyed a massive inflow of $17.8 billion in assets.
Last month, Grayscale said it was in talks with the SEC to convert some portion of its ETF assets into a Bitcoin Mini Trust with lower fees. However, the company has refused to disclose what the new fees will be. Grayscale currently charges 1.5%, which is about 0.25% larger than its rivals charge, in fees on its ETF. Sonnenshein has noted that there is hope that the fees will decrease soon. “Over time, as markets mature, we anticipate that GBTC’s fees will come down,” Sonnenshein said.
