Grayscale’s newest Bitcoin (BTC) exchange-traded fund (ETF), Grayscale Bitcoin Mini Trust, has seen an unprecedented level of net inflows in 2024. According to a recent announcement from Grayscale, the fund managed to pull in over $1 billion in new investments as of December 17.
A Brief History of Grayscale’s ETFs
Grayscale’s foray into the world of Bitcoin and Ethereum (ETH) ETFs began with the launch of its flagship funds, Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE), back in July. However, these older funds came with a hefty price tag, charging management fees of 1.5% and 2.5%, respectively.
The Rise of Low-Cost Mini Trusts
In an effort to cater to the growing demand for low-cost cryptocurrency exchange-traded products (ETPs), Grayscale spun off two new ETFs – Grayscale Bitcoin Mini Trust and Grayscale Mini Ethereum Trust – in July. These new funds charge a significantly lower base fee of 0.15%, excluding promotions, making them the cheapest spot cryptocurrency ETFs on the market.
The Success of Low-Cost Crypto ETPs
According to John Hoffman, Grayscale’s managing director and head of distribution and partnerships, "The success of BTC and ETH to-date is emblematic of strong client demand for low-cost [crypto] ETPs." This sentiment is echoed by the impressive performance of Grayscale Bitcoin Mini Trust, which now manages over $4 billion in assets as of December 17.
Fee Wars Intensify
The launch of spot BTC and ETH ETFs in January and July, respectively, sparked a fee war among fund issuers vying for investor inflows. In an effort to attract investors, many newly launched spot crypto ETFs temporarily waived or discounted their fees, typically for a period ranging from six months to one year.
VanEck Extends Fee Waiver
In November, VanEck extended the fee waiver for its Bitcoin ETF in a bid to woo investors. This move is part of a larger trend in which issuers are trying to attract investors with low or no fees. Spot crypto ETFs generally charge shareholders between 0.15% and 0.25% of assets under management each year, making Grayscale’s GBTC and ETHE outliers with their 1.5% and 2.5% management fees.
Beyond Bitcoin ETFs
Grayscale also manages a suite of alternative cryptocurrency funds, some of which may become ETFs in 2025. In October, the company launched an investment fund for Aave’s governance token (AAVE), while in August, Grayscale launched three trusts to invest in the native protocol tokens of Sky (previously MakerDAO), Bittensor, and Sui.
Proposed Index ETF
In an Oct. 29 filing, NYSE Arca asked the Securities and Exchange Commission (SEC) for permission to list a proposed Grayscale index ETF called Grayscale Digital Large Cap Fund. This fund would hold a diverse portfolio of cryptocurrencies, marking another step towards the growth of cryptocurrency-based ETFs.
US President-Elect’s Crypto-Friendly Agenda
The incoming US administration, led by President-elect Donald Trump, has promised to turn the US into the "world’s crypto capital." As part of this agenda, crypto-friendly leaders are being tapped to head financial regulators. In anticipation of this shift, issuers are seeking to list a variety of proposed crypto funds, including index ETFs and ETFs offering staking.
A Bright Future for Crypto ETFs
As the landscape of cryptocurrency-based ETFs continues to evolve, it is clear that Grayscale’s low-cost Mini Trusts have played a significant role in attracting investor attention. With the success of these funds, it remains to be seen whether other issuers will follow suit and launch their own low-cost ETFs.
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