Grayscale introduces ‘mini’ Bitcoin ETF to alleviate investor tax burdens and curb outflows

Grayscale, the issuer of the world’s largest Bitcoin exchange-traded fund (ETF), has applied for a smaller version of its popular Grayscale Bitcoin Trust (GBTC) ETF under the “BTC” ticker, according to a Mar. 12 filing with the US Securities and Exchange Commission (SEC).

Grayscale said:

“This would be net-positive for existing GBTC investors, who would benefit from a lower blended fee with the same exposure to Bitcoin, spanning ownership of shares of both GBTC and BTC.”

If approved, the proposed ETF will debut a cost-effective iteration of its GBTC ETF. It will be seeded through an undisclosed percentage of GBTC, and shareholders of the current GBTC will seamlessly transition to holding shares in both GBTC and BTC, ensuring no taxable implications.

The proposed ETF will be listed on the New York Stock Exchange, operating independently from Grayscale’s GBTC fund.

Why did Grayscale file for a ‘mini’ ETF?

James Seyffart, an ETF analyst at Bloomberg, explained Grayscale’s maneuver as a savvy move to compete against rivals without compromising on fees for its profitable GBTC investment offering.

Besides that, Seyffart pointed out that the new trust could offer GBTC investors tax-free exposure to the flagship digital asset. He said:

“[The Mini ETF] definitely helps out long term GBTC holders — particularly the taxable ones who were sorta stuck with potential capital gains tax hits. Not a full solution. But way more helpful than launching a standalone product from scratch.”

Furthermore, introducing a miniature version could prevent customers from migrating to more cost-effective alternatives.

GBTC, since its inception in January, has witnessed outflows exceeding $11 billion. This trend is primarily attributed to its high fees of 1.5%, notably higher than competitors charging 0.3% or even less.

Eric Balchunas, Bloomberg senior ETF analyst, opined:

“This way, [Grayscale] can keep some of that juicy 1.5% assets while placating a bit of investors with this treat. Also, BTC then gives something competitive for their salespeople to have when talking to advisors who probably find a 1.5% fee an instant dealbreaker.”

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