The Death of Grayscale’s Bitcoin ETF

TL;DR

• Grayscale is creating a new, low fee ETF and letting its existing shareholders move over to it (tax free), meaning the original high-fee fund’s days are numbered.

Full Story

This should logically result in the death of the Grayscale Bitcoin ETF.

(We can’t see how it wouldn’t).

But shoot, we’re jumping the gun here…

First, if you’re not up to speed on the BTC ETF gossip, here’s what you’ve missed:

When all of the BTC ETFs launched, Grayscale didn’t start cold — instead, it converted its Bitcoin Trust into an ETF — the exact differences between which you don’t need to know for this story, outside of this:

Grayscale had a bunch of shareholders in its Trust, which it had wedged between a rock and a hard place when it converted the trust into an ETF.

Cause if the Trust holders were to sell their newly converted ETF shares, they were going to have to pay ~15% in capital gains tax.

Knowing this, Grayscale kept their management fees higher than their competitors (1.5% vs. BlackRock’s 0.25%), assuming their customers wouldn’t leave and take the tax hit.

But they were wrong! Grayscale investors have been leaving in droves, to the tune of billions.

Now, here’s how Grayscale’s Bitcoin ETF dies:

To stem the bleeding, Grayscale is about to launch another Bitcoin ETF — this time, with the lowest fees on the market (0.15%) — and they’re allowing anyone holding shares in their old high-fee fund to make the jump to its low-fee little brother, without taking a tax hit.

Making the old ETF’s days numbered.

Cause whether you’re an existing Grayscale client, or entering the market for the first time — why opt for the fund with the highest fees??

And if you’re wondering why Grayscale doesn’t just lower its fees on its existing fund, the simple answer is:

We have no idea ¯\_(ツ)_/¯

Maybe it’s a ‘easier to star afresh rather than change the existing reputation’ thing?

(It makes no sense to us either).