This article will interpret the reasons behind the deep accumulation of funds in Grayscale GBTC from the perspectives of investment return, liquidity, spread, and taxation.

Author: Nancy, PANews

As the market volume continues to grow, the fund movement of Bitcoin spot ETFs has become an important indicator for market observation, and the strong momentum of attracting funds can inject a strong boost into the industry. Among these ETFs, despite the continuous outflow of funds, Grayscale's GBTC still has a leading advantage in asset management scale under much higher fees compared to its peers.

This PANews article will interpret the reasons behind the deep accumulation of funds in Grayscale GBTC from the perspectives of investment return, liquidity, spread, and taxation. It is worth noting that as the fee reduction period for ETFs such as FBTC, ARKB, BITB, BTCO, and EXBC approaches, it may have a certain impact on market competition.

GBTC has accumulated a net outflow of over $18.66 billion, and Grayscale intends to split the ETF to ease fee pressure

Since converting to a spot ETF in January 2024, Grayscale's GBTC has been facing capital outflows. According to SoSoValue data, as of July 11th, the historical net outflow of GBTC has reached $18.66 billion, a figure that is almost the same as the total net inflow of BlackRock.

In addition to investors taking profits, high fees are also an important reason behind the large outflow of Grayscale's funds. Compared to issuers such as BlackRock, Fidelity, and Bitwise, which have management fees at or below 0.25%, GBTC's fee rate is as high as 1.5%. Even before the SEC approved Bitcoin spot ETFs, other 10 ETFs had reduced fees to gain favor with investors, but GBTC did not make any adjustments.

For cost-conscious investors, GBTC is not attractive at all. In response to the competitive pressure from these competitors due to fees, Grayscale has also applied for a mini version of GBTC with a fee of only 0.15%. Grayscale will inject over 63,000 bitcoins into the Mini Fund, accounting for about 10% of GBTC's existing assets. To retain existing investors, the Mini GBTC also allows them to automatically transfer to the new fund without paying capital gains tax.

In addition to Bitcoin spot ETFs, Ethereum spot ETFs, including Grayscale's, may also be launched soon. Bloomberg ETF analyst Eric Balchunas predicts that the SEC may approve them on July 18th. However, Grayscale has not disclosed the fee issue in the revised S-1 documents for the Ethereum spot ETF and the Ethereum Mini Trust. According to industry predictions, the management fees used by the issuer to pay for the fund's maintenance expenses, such as marketing expenses, salaries, and custody services, are mostly between 0.19% and 0.3% for most Bitcoin spot ETF issuers, and Ethereum ETF issuers may also follow suit.

With 671 listed institutions holding positions, these factors may become the main driving force for holding

Despite facing capital outflows in the past few months, GBTC's market size is still considerable among many competitors. According to SoSoValue data, as of July 11th, GBTC's net asset value still reached $15.65 billion, accounting for approximately 30.9% of the total scale of Bitcoin spot ETFs, second only to the veteran player BlackRock.

According to PANews statistics, among the Top 5 Bitcoin spot ETFs, GBTC has 671 institutional holdings, far exceeding other ETFs. Fintel data shows that the listed companies holding GBTC include asset management giants SIG, asset management company Horizon Kinetics Asset Management, Wall Street giant Morgan Stanley, and top hedge fund Millennium Management, with these institutions collectively holding over 7,735 shares of GBTC, valued at nearly $3.94 billion at the current price.

In the following text, PANews compared the market performance of the Top 5 Bitcoin spot ETFs to explore the multiple advantages of Grayscale's GBTC in the ETF battle.

User base under the first-mover advantage

Compared to other Bitcoin spot ETF issuers, Grayscale's GBTC made its debut as early as 2013, giving it a leading advantage of over ten years and a relatively solid user base. During this period, in addition to the high premium space (up to 43%) attracting arbitrageurs, the significant discount of GBTC (up to 48%) eventually narrowed, gaining the trust of many investors. Moreover, early holders also achieved a very high return on investment. Google Finance shows that as of July 11th, GBTC has achieved an increase of up to 9325.9%.

Investment return and resilience to market downturns

Return on investment and risk control are important factors for investors to consider. In terms of investment return, since its listing on January 11, 2024, the average return on investment for the top five Bitcoin spot ETFs is 25.7%, with GBTC leading at 38.2%, ahead of IBIT, FBTC, ARKB, and others. The average maximum drawdown rate for these ETFs is 22.7%, and there is no significant difference in risk resistance among them.

Liquidity and demand performance

Liquidity is somewhat correlated with product scale, and the level of liquidity will affect the convenience and cost of trading for investors. The average monthly trading volume of the Top 5 Bitcoin spot ETFs is $287 million, with IBIT, FBTC, and GBTC above the average level. Although GBTC ranks third at $233 million, BlackRock and Fidelity, the top two, have a reputation and abundant resources in the traditional financial field, making it easier for their Bitcoin ETF products to gain the trust of users outside the circle. The bid-ask spread is an indicator of the asset's supply and demand relationship, with the average spread of these ETFs at 0.04%, with BlackRock at 0.02% lower than other ETFs.

Potential tax issues

Although the launch of Bitcoin spot ETFs provides a more convenient and secure investment path for more investors, capital gains tax must also be paid, and the specific tax rate depends on the investor's holding period. This also means that GBTC holders need to weigh the trade-off between fees and capital gains tax.

Previously, Shehan Chandrasekera, tax director of CoinTracker, explained that if Bitcoin ETF assets held for less than a year are sold, the resulting short-term capital gains will be subject to ordinary income tax, with the tax rate possibly ranging from 10% to 37% depending on the overall taxable income and filing status. If ETF assets are held for more than 12 months before being sold, long-term capital gains will be subject to capital gains tax, with the tax rate possibly being 0%, 15%, or 20%. If income exceeds a certain threshold, in addition to the aforementioned capital gains tax, a 3.8% tax may also need to be paid.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。