UPDATE: On Tuesday, Grayscale indeed filed to convert its flagship Grayscale Bitcoin Trust (GBTC) into a Bitcoin spot ETF. The below story is from Monday.
Grayscale is reportedly moving ahead with plans to convert its Grayscale Bitcoin Trust (GBTC) to a Bitcoin exchange-traded fund backed by physical Bitcoin. A corresponding filing with the U.S. Securities and Exchange Commission (SEC) may be submitted early this week, according to a CNBC report.
As of October 15, Grayscale held $52.6 billion in assets under management, with as much as $38.6 billion, or 73% of all funds, allocated to GBTC. However, the trust comes with a number of disadvantages, such as a six-month lock-up period on the investments and a 2% annual management fee.
The fund has also been stuck trading at a discount to Bitcoin since February this year. At press time, the GBTC discount is 15.15%.
Per CNBC, Grayscale decided to move for a spot Bitcoin ETF immediately after the SEC approved ProShares Trust’s futures-based ETF last Friday.
According to the anonymous sources familiar with the matter, the investment firm’s move could be an attempt “to force the SEC’s hand.”
“If they are comfortable with Bitcoin futures, regulators should also be comfortable with the underlying market, the thinking goes,” the source told CNBC.
The SEC green lighting the ProShares futures ETF is largely considered as the primary reason behind Bitcoin’s latest rally above $62,000.
Bitcoin ETF preferred by investors
Still, some investors have misgivings about the Bitcoin futures product.
Unlike futures Bitcoin ETFs, that are tied to the CME-traded derivatives contracts, a “proper” Bitcoin ETF is backed by the actual underlying asset. Fees on a futures-based Bitcoin ETF are also reportedly much higher. Matt Hougan, the CIO of Bitwise, said that these products could come with “~6-12%” in fees and total costs.
C. Tail risk: Remember $USO in 2020? Position limits, liquidity, etc — things can break.
In sum: A futures-based Bitcoin ETF comes with ~6-12% all-in costs, ~15% dilution, and tail risk.