Grayscale CEO says GBTC Bitcoin ETF fees will come down over time

LONDON — The boss of digital asset management firm Grayscale, which manages the $26 billion exchange-traded fund GBTC, has said that fees on its flagship product will come down over time, after its outflows reached $12 billion.

Grayscale CEO Michael Sonnenshein said that the crypto fund manager expects to bring fees on its Grayscale Bitcoin Trust ETF down in the coming months, as the nascent crypto ETF market matures.

“I’ll happily confirm that, over time, as this market matures, the fees on GBTC will come down,” Sonnenshein told CNBC in an interview on Monday. The firm previously defended its costlier-than-market-average charges.

“We have seen this in countless other exposures, countless other markets, you name it, where typically when products are earlier in their lifecycle, when they’re new to be introduced, these [fees] tend to be higher. And, as those markets mature, and as those funds grow, those fees tend to come down, and we expect the same to be true of GBTC.”

GBTC has logged outflows of more than $12 billion since it was converted into an ETF in early January, according to data from crypto investment firm CoinShares, due in no small part to its higher-than-average fees.

CoinShares’ data shows that GBTC recorded its biggest single daily outflow on Monday, with withdrawals totalling $643 million.

“Of course, we anticipated having outflows,” Sonnenshein told CNBC. “Investors have been wanting to either take gains on their portfolio, or arbitragers coming out of the fund, or people unwinding positions that were part of bankruptcies through forced liquidation.”

Market commentators argue that the bankruptcy of crypto giant FTX has played a significant role in the selloff of GBTC. FTX was a major holder of GBTC before it filed for insolvency in November 2022, holding about 22 million shares as of Oct. 25.

The FTX bankruptcy estate reportedly offloaded the majority of its shares in Grayscale’s bitcoin ETF, according to January reporting from Bloomberg and CoinDesk.

“None of that came as a surprise, right,” Sonnenshein said, speaking about the outflows. “What we’ve seen is GBTC continue to trade liquidly with tight spreads, and across a very diversified shareholder base. So we kind of think we’re between the first and the second inning of this.”

“We’re kind of at the end of that first inning now, where the pent-up demand for buying has hopefully been satisfied, the pent up demand for selling has also hopefully been satisfied,” Sonnenshein added.

“And now we’re kind of starting to move towards that second and third inning, where there’s so much more of the market that still is not yet accessing these products.”

The crypto fund manager charges a 1.5% management fee for GBTC holders, significantly higher than the charge commanded by many ETF providers, including BlackRock and Fidelity.

Vanguard has waived fees for investors entirely until March 2025 in a bid to lure in deposits.

Grayscale’s Sonnenshein defended the firm’s high fees at the time, telling CNBC they were justified by GBTC’s liquidity and track record. He said that the reason other ETFs have lower fees is that their products “don’t have a track record,” and the issuers are trying to lure investors with fee incentives.

Sonnenshein said the reason other ETFs have lower fees is that the products “don’t have a track record” and the issuers are trying to attract investors with fee incentives. “I think from our standpoint, it may at times call into question their long-term commitment to the asset class,” he said.

Sonnenshein told CNBC Monday that “all of these new issuers really came into the market to compete with us” and are also rivaling each other.

Grayscale also wants to introduce other ways of giving investors less costly ways of accessing its bitcoin ETF, including a “mini” version of its flagship product — the Grayscale Bitcoin Mini Trust, announced last week. The new ETF is set to trade under the ticker “BTC” and have a materially lower fee than GBTC.

The new BTC ETF would be effectively spun out of the Grayscale Bitcoin Trust ETF and seeded with an as-yet undisclosed portion of bitcoin underlying GBTC shares.

Under this structure, existing holders of GBTC would be able to benefit from a lower total blended fee while maintaining the same exposure to bitcoin, spanning ownership of shares of both GBTC and BTC.

Existing GBTC shareholders would also be able to convert into BTC without paying capital gains tax.

The firm is currently awaiting approval from the U.S. Securities and Exchange Commission for its Bitcoin Mini Trust ETF.

Moving forward, Sonnenshein wants investors to turn their attention toward the business’ other crypto investment products, which track prices of different cryptocurrencies including ether and solana.

The company is trying to have its Grayscale Ethereum Trust converted into an ETF, but is awaiting SEC approval.