TL; DR
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Grayscale creates a new low-fee ETF and lets existing shareholders switch to it (tax-free), meaning the days of the original high-fee fund are numbered.
Full story
This should logically result in the death of the Grayscale Bitcoin ETF.
(We don’t understand how that couldn’t be).
But shoot, we’re jumping the gun here…
First, if you’re not up to date with the BTC ETF gossip, here’s what you missed:
When all the BTC ETFs launched, Grayscale didn’t start cold – instead, it converted its Bitcoin Trust into an ETF – the exact differences between which you don’t need to know for this story, beyond:
Grayscale had a number of shareholders in its Trust, which it found stuck between a rock and a hard place when it converted the trust into an ETF.
Because if the trust holders were to sell their newly converted ETF shares, they would have to pay ~15% in capital gains taxes.
Knowing this, Grayscale kept their management fees higher than their competitors (1.5% vs. BlackRock’s 0.25%), assuming their clients wouldn’t leave and take on the tax burden.
But they were wrong! Grayscale investors have left en masse, for billions.
This is how Grayscale’s Bitcoin ETF dies:
To stop the bleeding, Grayscale is about to launch another Bitcoin ETF – this time with the lowest fees on the market (0.15%) – and they are allowing anyone who has shares in their old high-fee fund to make the jump to its low-fee little brother, without receive a tax bill.
The days of the old ETF are numbered.
Because whether you are an existing Grayscale customer or are entering the market for the first time: why choose the fund with the highest costs?
And if you’re wondering why Grayscale isn’t just cutting fees for the existing fund, the simple answer is:
We have no idea ¯\_(ツ)_/¯
Perhaps it is ‘easier to become a new star rather than change the existing reputation’?
(It makes no sense to us either).
