Mar 12, 2024 - Business

Grayscale wants to launch a mini-version of its flagship bitcoin ETF

Illustration of a bitcoin sitting within a baseball glove

Illustration: Sarah Grillo/Axios

Grayscale Investments has filed to launch a mini-version of its flagship bitcoin exchange-traded fund known by its ticker GBTC.

Why it matters: It's a shrewd strategy to compete in the booming bitcoin ETF race alongside much larger money managers, without having to cut or waive fees on its lucrative investment product.

Catch up quick: Before converting its structure during January's ETF wave, The Grayscale Bitcoin Trust was the only game in town, and its 2% fee just the price of entry.

  • Since then, its slightly discounted fee of 1.5% looks eye-watering next to the zeroes offered by similar products on the market.

Grayscale is now looking to seed the proposed mini fund — called Grayscale Bitcoin Mini Trust, ticker BTC — with a portion of GBTC's assets, proposing what is effectively a spin-off, but with an ETF.

  • Each "mini" share would offer a fraction of bitcoin and come with a lower fee than the now $28.5 billion-asset GBTC ETF — how much is unknown, the details aren't in yet.

The big picture: The prospect of a mini could keep customers from jumping to cheaper rivals — a carrot to keep them interested with GBTC flows more "out" than "in" these days.

  • If approved, GBTC customers would see some of their old GBTC shares converted to new shares in the mini, achieving a lower blended expense ratio, and, possibly averting the capital gains taxes from selling GBTC.

Zoom out: The concept of a "mini [name your asset]" is not new.

  • There are mini versions of gold ETFs, for example, that offer a fractional share of the underlying precious metal compared to the older brother product, with lower fees.
  • Case in point: GLD vs GLDM.

My thought bubble: Bloomberg analyst James Seyffart is likely taking a victory lap Tuesday; he's been talking about GBTC launching a cheaper "mini" since at least March 2021.

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