- The Grayscale Bitcoin Trust (GBTC) is seeing strong outflows as competition rises.
- The ETF has a highly expensive expense ratio of 1.50%.
- Other newer ETFs have a smaller ratio, making them quite affordable.
The Grayscale Bitcoin Trust ETF (GBTC) stock price has continued to track the performance of Bitcoin. After crashing to a low of $34.35 last week, the GBTC stock has surged back to over $38 and is nearing its YTD high of $44.
Grayscale Bitcoin Trust is expensive
However, the Grayscale Bitcoin Trust is facing serious headwinds as investors continue withdrawing their holdings. Data in its website shows that GBTC has over $21 billion in assets, making it the biggest spot Bitcoin ETF in the world.
However, the fund has already lost over $4.9 billion in assets in the past three weeks. This trend makes sense and analyst expect that it will continue in the coming months. That is because GBTC is still one of the most expensive ETFs in the United States.
GBTC has an expense ratio of 1.50% while the average ETF expense ratio is less than 0.50%. This means that if you invested $100k in GBTC and the price remained stagnant for a year, you will pay the company $1,500. In contrast, if you invested in the Ark Bitcoin ETF (ARKB) or Bitwise Bitcoin ETF (BITB), you will pay nothing in the first six months.
ETFs by other companies like Blackrock, Invesco, and Franklin Templeton have a smaller expense ratio than GBTC. As such, many investors are moving to these alternative assets. For example, the iShares Bitcoin Trust (IBTC) has reached over $6 billion in assets.
Investing in Bitcoin directly is a better alternative
Some analysts wonder why many investors are still paying a hefty fee for the GBTC since they can own Bitcoin directly and pay no fees. This happens when a person buys Bitcoin in an exchange like Coinbase and then move it to a cold wallet for safe-keeping.
The activities in GBTC explain why Bitcoin price sold off shortly after the spot Bitcoin ETF as the number of sell orders rose. Now, there are signs that the BTC price is on a recovery mode. It has already jumped from $38,500 to over $43,5000. In all, many crypto analysts believe that Bitcoin has room to run and possibly retest its all-time high of $67,000.
Analysts cite the upcoming Federal Reserve interest rate cuts and the halving event that will happen in April. As I wrote on Tuesday, The Mooch, noted that Bitcoin could surge to over $170k in the coming years.
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