Grayscale Bitcoin reserves decreased by approximately 12,000 Bitcoin (BTC), worth approximately $511.2 million based on current market prices. Are investors abandoning Grayscale Bitcoin Trust (GBTC) due to high fees?
Grayscale Bitcoin Trust (GBTC) has provided institutional investors with easy access to Bitcoin. However, following the approval of Bitcoin spot exchange-traded funds (ETFs), investors have other alternatives with lower fees.
More GBTC refunds in the coming period?
The screenshot below shows that since Bitcoin ETFs began trading, GBTC’s Bitcoin reserves have steadily decreased. On January 11, the company had over 599,532.60 BTC in reserves. But on January 16, reserves fell by 12,000 BTC to 587,532.60 BTC.
Read more: What is a Bitcoin ETF?
Bitcoin reserves in grayscale. Source: CryptoQuant
GBTC imposes fees of up to 1.5%. In contrast, competitors like BlackRock’s iShares Bitcoin Trust charge fees as low as 0.25%, which is significantly lower than GBTC. As a result, some community members believe investors may switch to other Bitcoin ETFs that offer lower fees.
“Expect numerous redemptions (resulting in selling pressure) to be recycled into other ETFs in the coming days due to the fee differential,” said Bitcoin analyst Dylan LeClair.
In February 2023, discounts to net asset value (NAV) were approximately 47%. Now, GBTC discounts to NAV have narrowed to 1.18%. This could be another reason for investors to redeem their shares and book profits.
GBTC discounts to NAV. Source: YCharts
However, GBTC offers better liquidity than other ETFs. Due to high liquidity, slippage is reduced, making trading activities economically efficient.
“If traders enter and exit GBTC within minutes, hours, days or even weeks, the 1.5% fee will be negligible for them. This is less than half of a basis point per day. Traders would much rather pay 0.42 basis points per day than pay a large bid/ask spread to enter or exit a trade on an illiquid instrument,” explained X (Twitter) user Rip VanWinkle.
Therefore, the company may appreciate charging high fees until a competitor provides better liquidity.
Read more: The 7 best cryptocurrency exchanges with the lowest spreads in 2024
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