Written by Suzanne McGee and Hannah Lang
(Reuters) – Grayscale Bitcoin Trust recorded $1.9 billion in outflows last week, according to BitMEX Research data, while the U.S. spot Bitcoin exchange-traded fund (ETF) group posted a There was a net outflow.
Since the U.S. Securities and Exchange Commission approved new crypto ETFs in January, there has been buying interest in new funds such as BlackRock Inc. and Fidelity Investments Inc., but that has offset last week’s sell-off among Grayscale holders. The data showed that this was not enough.
Inflows into nine other ETFs launched at the same time as Grayscale’s fund conversion also slowed last week as Bitcoin prices slumped compared to highs hit earlier this month.
Analysts say Grayscale’s outflow is due to significantly higher fees than its competitors and a sale by a bankruptcy trustee.
Brian Armor, an ETF analyst at Morningstar, said Grayscale has chosen to keep the management fee for converted ETFs at 1.5%, compared to 0.25% for BlackRock funds, compared to competitors. Other companies said the rates were even lower, including fee waivers.
A Grayscale spokesperson said the company’s team expects strategies such as profit-taking, arbitrage and bankruptcy sales to satisfy creditors such as FTX will lead to net outflows. Grayscale CEO Michael Sonnenshein told CNBC last week that the company would reduce fees on its flagship fund “over time.”
In contrast to Grayscale’s outflow, assets in BlackRock’s iShares Bitcoin Trust have seen the most dramatic increase since March 1, according to data from Morningstar and TrackInsight. It reached the $10 billion level. Total inflows last week were $828.3 million, down from $2.48 billion in the week ending March 15, according to data from BitMEX Research.
BlackRock could not be reached for comment.
Grayscale also presents other challenges. Digital asset management provider Wealthfront announced last week that it would replace Grayscale ETFs with iShares funds as an alternative, citing lower fees and higher average daily trading volume.
“Overall, IBIT is the most attractive option when you consider the actual costs of buying and selling in terms of total expense ratio and bid/ask spread,” said Alex Michalka, vice president of investment research at Wealthfront. I thought about it,” he said. .
After soaring as much as 16% earlier this year, Bitcoin remains about 9% below its all-time high hit just two weeks ago. An ETF’s return reflects its price movement.
“Whenever an asset reaches an all-time high, there tends to be some profit-taking, or at least a lull in the buying pace,” said Adam Zeh, head of digital asset products at ETF provider GlobalX.
The key to reviving Bitcoin ETF flow may prove to be not only more stable prices, but also greater signs of interest from institutional investors.
So far, “most of the trading activity has been dominated by individual investors and perhaps a small number of hedge funds,” said Kyle da Cruz, director of digital asset products at VanEck. VanEck has its own Bitcoin ETF, and competition is heating up for its share. Inflow is low.
He said “this is still a nascent asset class and an area where ‘stickier’ money” has not yet entered.
(Reporting by Suzanne McGee and Hannah Lang; Editing by Megan Davis and Margherita Choi)
