In the battle of Bitcoin ETFs, which giant is "shooting the knife edge"?

Author: Ian Allison, CoinDesk; Compiled by: Songxue, Golden Finance

In the field of exchange-traded funds, size matters. In the spot Bitcoin ETF space, the giant is Grayscale Investments, which would have more than $27 billion in assets under management (AUM) if approved by the SEC, while other potential issuers are starting from scratch.

For those who haven’t followed the Bitcoin ETF proposal process in detail, about a dozen issuers appear to be on the verge of receiving SEC approval at the same time. Grayscale stands out with its holdings of over 619,000 BTC, which began operating in 2013 and offers institutional investors a simple way to gain exposure to Bitcoin investments without directly holding the asset.

There are other deciding factors, such as how much these products will cost. But Grayscale's proposed ETF boost fee of 1.5% would be about 100 basis points, or 1 percentage point, higher than rivals on which the company is banking on trading volume and liquidity.

“We are hugely different from any other product coming to market because we have over a million investors and hundreds of millions of dollars in daily trading volume, and when it is approved for listing Later, this will continue." David LaValle, global head of ETFs at Grayscale Investments, said in an interview.

When it comes to fees, investors won't necessarily switch products based solely on fees to maintain the same risk exposure, such as choosing BlackRock or Fidelity's lower fee structure for a spot Bitcoin ETF. This move is especially unlikely when tax considerations are taken into account.

For example, a Grayscale investor with long-term capital gains in the 15% to 20% range will look to the long term and make up for taxes based on basis points saved. Eric Balchunas, an ETF-focused analyst at Bloomberg Intelligence, agreed that taxes will be an important consideration for many when it comes to Grayscale.

“The tax issue, in my opinion, is good for Grayscale,” Balciunas said in an interview. "A lot of times with mutual funds, there are people who don't want to be in some active mutual fund that has excessive fees and underperforms, but after so many years in a bull market and the taxes hit it so hard, they stay there."

Nonetheless,most market observers believe Grayscale will experience some degree of outflows, especially given that its Grayscale Bitcoin Trust (GBTC) has recently traded at a higher price than Bitcoin. Deep discount on base value.

Sui Chung, CEO of cryptocurrency index provider CF Benchmarks, said in an interview: “There are a lot of people buying GBTC and betting that it will become an ETF.” “So, they Buying at a discount, betting that once it becomes an ETF they can redeem it at NAV and make a profit. It's hard to say what the AUM will be, but it's likely to be a sizeable chunk."

Certain esoteric elements can be added to this. While it's not Grayscale's fault, an unknown factor is how much goodwill Grayscale has lost among investors from years of deep NAV discounts, Chung said. There’s also the unfortunate circumstance that Grayscale’s owner, Digital Currency Group, is in legal trouble. "Despite the fact that GBTC is unlikely to go bankrupt, not every investor understands this. Some may feel they would be better off with BlackRock or Invesco," Chung said. (Genesis, another division of DCG, is being reorganized in bankruptcy court.)

But the ETF industry is complex, Balciunas noted, and even if Grayscale rapidly sheds billions of dollars in assets, the fund will still have Huge advantage.

He said: "GBBTC had more than 20 billion US dollars in trading volume on the first day of its opening, and the daily trading volume reached 350 million US dollars, just like holding a gun in a knife fight." "In these products Any one would need to make that much money in three years, let alone week one. If Grayscale can convert on day one, it will make all but BlackRock and Fidelity exceptional difficulty".

While all signs point to Grayscale being approved along with other promising ETFs, Balciunas said it’s conceivable that the SEC could still rely on regulators’ established commitments to set a level playing field. goals, trying to prevent or delay them.

"You have to remember that when Grayscale won the case, it was embarrassing to the SEC," Balchunas said. "I'm not saying the SEC is stingy, but if they did want to retaliate, my guess is they would probably find some kind of parking ticket to piss them off. But then they could get sued again. So it's complicated. ".