- Grayscale Bitcoin ETF is the biggest one in the industry with over $1 billion in assets.
- It is facing competition from funds by Blackrock, Invesco, and Franklin Templeton.
- GBTC is a costly ETF with an expense ratio of 1.50%.
The Grayscale Bitcoin Trust (GBTC) has emerged as the biggest spot ETF in the world with over $28 billion in assets. It is much bigger than the other eleven funds, including from Franklin Templeton and Blackrock, combined.
GBTC has benefited from its first-mover advantage in the Bitcoin ETF industry since it had billions in assets in its trust. As such, it maintained most of these assets after it converted the trust into a spot ETF.
GBTC’s assets have dropped in the past few days. The biggest withdrawal was from the FTX Estate, which sold over $1 billion worth of its funds this week. Data by ETF shows that it has had outflows in the past four straight days totalling $2.2 billion. Some of these outflows are because Bitcoin has plunged from $49,000 to below $40,000 today.
The GBTC ETF stock will likely continue tracking the performance of Bitcoin in the long term. For example, in the past, gold and the SPDR Gold ETF (GLD) have had a perfect correlation.
Despite this, it is clear that GBTC is not a good investment because of the fees it charges. GBTC has an expense ratio of 1.50%, which is higher than other spot ETFs. For example, Bitwise and Ark Invest have a fee waiver for the first six months. Blackrock’s IBIT has a ratio of 0.25% while VanEck’s HODL has 0.25%.
Therefore, a $100,000 investment in GBTC will cost you $1,500 every year if Bitcoin remains stable. Your loss will be much higher if Bitcoin declines. Similarly, investing in Fidelity’s FBTC, Valkyrie’s BRRR and VanEck’s HODL will cost you only $250. That is a spread of $1,250, especially for a product that does the same.
Fees matter, especially for long-term investor. In ten years, unless Grayscale reduces its fees, the total fee for a $100k investment will be $15,000.
Many analysts even question the logic of paying this fees while you can buy Bitcoin, store it in a cold or hot wallet, and avoid paying fees. I believe that the latter option is better than investing in these ETFs.
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