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It’s fair to say that by now, nearly all advisors are aware that there are 10 spot bitcoin exchange traded funds trading in the U.S. after those products were approved by the Securities and Exchange Commission (SEC).
Those funds are proving popular with many retail investors and some advisors, too. There’s also been a story within the story. Grayscale, which was one of the leaders of the push to get the SEC to finally sign of spot bitcoin ETFs has seen its Grayscale Bitcoin Trust (NYSEARCA: GBTC), previously an index fund, shed assets because the issuer has maintained the fund’s annual fee of 1.50%, or $150 on a $10,000 investment.
That’s expensive in any corner of the ETF market and even more noticeable in a segment where all the products do essentially the same thing, meaning fees are paramount to end users, including advisors. Some issuers of spot bitcoin ETFs have even waived fees, meaning investors aren’t subject to expense ratios for extended periods of time. All the while, GBTC has shed $11 billion in assets since January, but it’s still the world’s biggest spot bitcoin ETF. To its credit, Grayscale is sensitive to this issuer and is planning to introduce a “mini” version of GBTC with a lower fee.
Inside Grayscale Plans
In a recent SEC filing, Grayscale revealed plans for the Grayscale Bitcoin Mini Trust, which if approved, would trade on the New York Stock Exchange (NYSE) under the ticker “BTC.”
“Most notably, this new ETF would be designed to have a materially lower fee than GBTC and through the innovative mechanics of a GBTC “spin-off” — which means a certain amount of the Bitcoin underlying GBTC shares (as of a to-be-determined record date in the future) would be utilized to ‘seed’ the new Grayscale Bitcoin Mini Trust, with shares of the new Grayscale Bitcoin Mini Trust being distributed pro rata to GBTC shareholders as of the record date, subject to appropriate regulatory approvals,” according to the issuer.
Obviously, there is no guarantee of success for any new ETF, but there is a template for the “mini me” approach in the world of alternative asset ETFs. Just look at the SPDR® Gold MiniShares® Trust (NYSEARCA: GLDM), which was designed to be the lower-cost alternative to the SPDR Gold Trust (NYSEARCA: GLD) – the world’s largest gold back ETF.
GLDM debuted in June 2018 and sports an annual expense ratio of 0.10%, well below the 0.40% charged by GLD. Today, GLDM has more than $6.7 billion assets under management.
BTC Unlikely to Cannibalize GBTC
Should BTC come to market, it’s unlikely to cannibalize GBTC. Using the GLD/GLDM template, the former still has nearly $57 billion in assets under management.
Plus, advisors and investors currently holding GBTC will benefit because the introduction of BTC is akin to a traditional corporate spin-off.
“We believe this would be net-positive for existing GBTC shareholders, who should benefit from a lower blended fee (spanning ownership of shares of both GBTC and BTC), while keeping the same exposure to Bitcoin,” adds Grayscale.
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